All Forum Posts by: Andrew Holmes

Hey Wendell: Thanks for pointing out my good. Even I have no clue why that is there. I was editing something and I guess it got in there. 

I agree. Vacants are great in OFF MLS Pre Fo

Here are a couple of places where you can find some stats

National Stats By Region

Individual sites by for each town

1. On Board Navigator

2. US Stats By Town

Hey Steve: I have a ton of them here in Chicago. I have about 153 so far personally and another 250 that others have done. I have a lot of contacts here commercial banks that will do these no problem but not in Kansas City. 

I don't want to post it all over bigger pockets but I tell you exactly how to find them in your area. Please do not share that info with out our permission.

Thanks 

Andrew.

Purchase Price: $ 70 K

CD Escrow Set Up: $ 40 K For Rehab

Loan at closing $ 110,000

Appraised value after rehab $ 160,000

Loan amount on the back end refi: $ 160,000 * .75% = $ 120,000 (We could have refinanced up to $ 120K but we only refinanced $ 110,000)

We borrowed a long term commercial loan and paid off the full loan on the front end. 

Within less than 60 days bought the rehabbed it and got all the money back. 

Key to this transaction - Our goal was to buy it with banks funds. With an equity of 30% minimum after rehab. Refinance it and leave ZERO in the deal still have cash flow a minimum of $ 400 per month and equity of 30%. 

Rent - $1500 (Term Of Lease 2 Years)

PITI - $ 956 (Commercial Loan 5% , 25 year with 5 year balloon)

Actual Net Cash Flow $ 544  /Per Month

We have done about 153 deals with pretty much the same numbers. The goal is to pay off our entire portfolio in 7 years or less with ZERO money stuck in the deals after refi.

Andrew Holmes

Finding Deals in a Hot Market – Chicago & Surrounding

Are you getting frustrated finding great deals? The key is, knowing what is happening in

TODAY’S marketplace. It’s amazing what has happened in the Chicago market place over the last year! In the past it was easy to buy and challenging to sell but NOW it’s tough to buy and easier to sell. Knowing stats such as absorption rates, homeowner rates and vacancy rates are some key tools to evaluate the market. 

Knowing what areas are moving better than others will give you a leading edge in the

market. Some price ranges within markets are moving very well while others are stagnant, yet the absorption rate has gone down to 5 month supply compared to 15.1 month supply approximately 18 months ago. Generally, the average absorption rate for most markets is 6 months and is considered normal. 

However in the Chicagoland area the average absorption rate is generally a 10 

month supply. Are you wondering why the Chicagoland area has a higher absorption rate

than the general market? It’s simple: The suburbs in the far outskirts of Chicago tend to

take longer to sell.

Here is another interesting point about the Chicago land market: 

First take a look at these stats for Single Family (SF) Attached SF and 2-3 unit buildings:

Total Inventory: 69,229

Under Contract or Pending: 25,118

Active: 44,111

Shadow Inventory: 30,111

Pre-Foreclosures: 32,101

If you look closely and diligently the opportunities become brighter and more

apparent, and sometimes just glaringly obvious.

Now, for some interesting news about home ownership in the United States: Pay Attention

because this affects real estate investors in a tremendous way!

US HOMEOWNERSHIP FELL TO THE LOWEST RATE IN ALMOST 18 YEARS!!

What does this mean to an investor? A HIGH RISING DEMAND FOR RENTALS AND

INVESTOR PURCHASES IN THE HOUSING MARKET 65% of Americans owned their homes in the first quarter which is down from 65.4 the previous year. It’s currently at the lowest levels since 1995!

time to get out of the market. The last time we got up to 69% (2007) all hell broke loose in

the market) These numbers are MY (Andrew Holmes) PERSONAL OPINION ONLY.

Let’s now take a look at what is happening with VACANCY RATES.

Vacancy rates for rented homes dropped to 8.6% from 8.8% a year earlier. Owner-

occupied vacancy rates also fell from 2.2% to 2.1%. BEWARE! The madness of over paying for properties has already begun. Many rehabbersa nd people who are holding properties for long term are overpaying. Recently, I had to turn down 2 deals that other investors were over paying by 25K.

If you are a wholesaler it’s time to step up your game NOW! There are new investors that

want properties and this can be a gold mining opportunity.

ARE YOU A WHOLESALER?

What methods are you using to find your deals?

What price range are you targeting?

Are you in a position to assign/sell an investor a

property?

The demand for homes and investment properties are pushing prices up and now is the

time to go back to POCKET INVESTING.If you are not aware of the POCKET INVESTING TECHNIQUE make sure you read up on the subject. There are pockets that are opening up in the marketplace that are on fire . Are you finding them? As you are looking for these pockets please keep in mind the intrinsic value of the real estate is key. Pocket investing

does not work well with rehabs and flips but it works great with wholesaling and long term holds. Do you know when the best time to set up searches is? October. Why? While most

investors are hibernating between October-February this is the perfect time to pick up

some really good properties. Less competition means more opportunities! By the time the

property is purchased and rehabbed spring is just a round the corner.

Here are a few suggestions on how to look for deals: 

 To begin with sort all deals by Pocket Investment Strategy and then:

1) Use the MLS search in the following order:

a. Short sales

b. Probates

c. Undervalued Listings

d. REO

f. Regular Sales

2) Search for Pre-foreclosures Occupied Properties ONLY that are not part of the MLS.

(Do not go after unoccupied pre-foreclosures)

3) Probates

4) Shadow Inventory owned by small banks narrowed by property type

5) Distressed properties or direct seller purchases

This is a lot to get started with, so try to just pick one that you feel most comfortable

with first, in an area that you feel comfortable with(no bigger than a 3 mile radius),

and try to get one or two in that area first, then try growing from there. You’ll start

getting to know your area faster than you think!

Until next time – keep looking, keep communicating,

and keep your lines open!

Andrew

Hey Vaundel: You bought a duplex I am assuming you bought it for renting it out for the long term. The discussion below is for rental properties only not cash flow properties. 

Please don't create an LLC or anything without thinking through all your options and long term goals.

Your long term goals will dictate what entity you set up. Most people think asset protection and taxation. They form entities with out understanding the long term goals. 

You are in the buying stage and building a portfolio stage you should form entities that are more helpful to build your portfolio rather than long term holding stage. 

Here are the stages of investing that investors should understand

1. Asset Accumulation (Buy in S corps my personal suggestion. Most attorneys and accountants will recommend LLC.)

This is my opinion show income and pay taxes because otherwise lenders will not give you refi loans. A lot of accountants will think you are nuts but if you want to buy at a high pace you need to show income from your properties. You cannot take huge capital expenses and heavy depreciation because if you show tight numbers on paper your growth will be hampered.

There are some other technical reason for buying in an S corp over an LLC. It's advanced refinancing techniques so I am going to keep that out from this post.

2. Asset Management Phase: Once you are not accumulating at a high pace then the properties go into management mode.

3. Long Term Asset Protection & Tax reduction Mode: Once you have equity of 25% or more then you need to think about asset protection. 

So think in terms of 

Accumulation Phase

Management Phase

Long Term Asset Protection & Tax Reduction Phase

James: Mr. Matt is right a certified letter is not enough. You need to deliver or have process server deliver the notice in person to a person over 13 years old. I will ask our attorney permission and post the documents. They are not my docs so I just need to check with him.

Andrew Holmes

Finding an investor friendly agent seems like a huge challenge for most investors. I am often asked how do you find an agent that understands an investors needs.

Let me start by first saying that most agents are nice folks that try to help their clients to the best of their ability. A lot of times real estate agents are constantly in the state of putting out fires so in a lot of cases they don't have the time or energy needed to truly understand an investors needs and specially the number that we as professionals investors need to hit. I know this because I have a real estate license since I was 20 years old so about 19 years at this point.

When I was selling a lot of houses as an agent I loved dealing with investors from the stand point of listing their properties for sale but I did not like dealing with them from the stand point of helping them buy properties. Now you will wonder why?

Well the simple answer is that a investor buyer takes a lot more of your time and generally they buy on the lower end of the pricing spectrum. When I was a selling a lot of home I was a very heavy listing agent. The listing required a lot less time and other hand working with buyers specially investors was very time consuming. For an agent all they have is their time if they busy then their time is worth a lot of money.

Today as an investor I understand why agents behave the way they do. Not because they don't want to help you but because most investors will eat up a lot of their time. A lot of good agents will have few investors that they have a good working relationship and they stick by each others side and it work because both have found a fine balance of working with each other without taking up too much of the agents time.

Before I layout some of the rules. Most agents are not investors themselves. They are in sales. Their job is to sell you a property. They are trained in retail pricing structure they do not understand the numbers we need as investors. Even though in some cases they may have done investment properties it is very rare to find an agent that really understands investing. This is not a knock on agents it's just the fact. Understand their mindset so that you have a better working relationship with agents. Of course their are rare exceptions like anything in life.

Here are some simple rules when working with agents if you follow them over time you will find a few great agents to work with.

1. Always be mindful of the amount of time you take

2. Do you research and due diligence before you have an agent take you a lot of house only to decide that you don't like they area.

3. Don't try to work with an agent that has a lot of listings. Try to work with their Buyer's Agent or ask them for a recommendation of who they would suggest you should work with. This will help you specially if you find an listing agent that does a lot of distressed properties. If they recommend someone your offers will magically get higher attention.

4. If you live in a large metro area and looking for properties in a large radius don't make an agent run from one end of the town to the other. You want some one that is local to that area and close.

5. Please make sure your proof of funds are in place or you are prequalified before you make an agent run all over town.

6. Don't work with agent that are really busy or agents that are brand new. The best option is someone who has some experience under their belt.

7. If you are buying condo in high rise building then work with someone that knows high rise condo. Don't pull someone from the suburbs. 

8. You are looking for HUD deals then go with some one that really does a lot of these. Same rule applies for Short Sales or REO deals. (Agents end up becoming specialists in a lot of cases because they have done a lot of specific type of deals this can be a huge advantage for you as an investor)

9. Be loyal - If an agent has done a lot of running around with you make sure you buy or rent through them so that they make money from the deal. In most cases just like you agents are hardworking professionals so be mindful and respectful.

10. If you follow these simple guideline you will come across a few really good agents that will bend over backward to help you. Keep those in your back pocket.  

Hey James: These are note from an attorney that we use to evictions hope they help you.

If you need exact notices may be I can paste them on here so they will help everyone is IL that needs to do an eviction.

Eviction in Illinois Are Done By The Following Rules:

There are some exception like the city of Chicago, Evanston & Cook County but the rest of the State Of IL is fairly straight forward.

It's a 5 Step Eviction Process:

1. 1. Sending the Tenant a 'Notice of Eviction"
2. 2. Filing a Complaint
3. 3. The Sheriff serves the Summons on the Tenant
4. 4. Going to Court
5. 5. The Sheriff removes the Tenant (if necessary)

Notice of Eviction
The first step in evicting a Tenant in Illinois is delivering the "Notice of Eviction." Depending on why you are evicting the tenant, Illinois has 3 different notice periods:

Five Day Notice of Eviction
The Five Day notice is only used for non-payment of rent. It gives the Tenant 5 days to pay the rent and late fees, or Vacate the premises.

(**Do Not Accept part of the rent other wise you have to go back to start all over)

Ten Day Notice of Eviction
The Ten Day Notice is used if the landlord needs to evict the tenant for violating the terms of the lease, such as unauthorized pets, illegal activity, etc. Although it may also be used for non-payment of rent. Generally in Illinois, the Tenant does not have the right to cure the lease violation and stay in the property. However, in the City of Chicago and some other areas, the Tenant may have a right to cure the violation and stay.

Thirty Day Notice
If the Tenant is on a month-to-month lease or an oral lease, the landlord can terminate the lease for any or no reason by simply giving a 30 Day Notice. If the tenant does not leave after 30 days, the landlord must file a Complaint to move forward with Eviction.

Delivering the Notice. The notice may be delivered in the following ways:

• Personally handing the Notice to the Tenant
• Giving the Notice to someone who is at least 13 years old and who is at the Tenant's home
• Mail the Notice by Certified Mail with a Return Receipt from the Tenant
• Leaving the Notice on the Ground in front of the Tenant if they refuse to accept it
• Posting the Notice of the door of the premises if nobody is living there

Counting the Notice Period. If the last day of a notice period is on a weekend or holiday, then the notice period expires on the next business day. If the notice was delivered by mail, then the notice period begins when the Tenant actually receives the notice.

Affidavit of Service. This is a document the Landlord must sign in front of a notary, by which the landlord is swearing that he property delivered or "served" the Tenant. This form is included with the Illinois Eviction Notice on this site, and will be necessary if you have to file a Complaint against a Tenant for Eviction (next step).

Filing the Complaint
If after receiving the Notice of Eviction the Tenant has not paid the rent or cured the lease violation (if they have that option), then the landlord must sue the Tenant for eviction by filing a Complaint with the County Clerk's Office in the County where the property sits. The County Clerk's Office will have an Eviction Complaint and Summons for the Landlord to fill out and file. There will be a filing fee when the landlord files this. The Clerk will then give the Landlord a copy of the Summons and Complaint for him to take to the Sheriff's Office to be delivered to the Tenant.

The Summons
The Summons is what the Sheriff Delivers to the Tenant telling them that they have been sued for Eviction. When the Landlord files the Complaint, the County Clerk will instruct the landlord to take a copy of the Complaint and Summons to the Sheriff's office, usually located nearby. The Sheriff will then deliver the Summons to the Tenant.

Your Day in Court
When the Landlord files the Complaint, the Clerk will give him a court date. The Landlord must show up for this court date. The landlord must take to court a copy of the Notice of Eviction, the Affidavit of Service, the Complaint, the Summons, and any witnesses or evidence needed to win the case. The landlord must tell the judge why he is entitled to possession of the property and why the Tenant should be evicted (non-payment of rent, etc.). If the Tenant does not show up, it is likely that the landlord will win by default, and the judge will grant the Landlord an Order for Eviction. If the Tenant does show up, the judge will rule after hearing both sides. After winning an Order for Eviction, the judge usually gives the Tenant 14-21 days to move.

Sheriff Removal
If a Tenant still has not moved after the fixed time ordered by the court in the Order for Eviction, the Landlord must go to the Sheriff. The Sheriff might require a deposit or fee, but will ultimately carry out the Order for Eviction and physically remove the Tenant.

Andrew Holmes

www.chicagocashflow.com

Hey Guys: Thanks for the response on here. I am new here so still getting a hang of things here.

You guys asked so great questions:

What is 2-5-7 Cash Flow For Life?

My belief is that every real estate investor should have a basic goal. 2 years 5 Properties 7 Years all PAID OFF & DEBT FREE. That equation equals Cash Flow For Life. We have a lot of folks that are at 2-10-7 or 2-15-7. A few go getters like Rahul are at 2-25-7.

The nice part about 2-5-7 is that in today's market even novice investors can learn this same strategy of investing and be free with in less than 2 years.

How do you refinance properties without any seasoning?

Well I could this is where you separate men from the boys. In all seriousness this is the most tricky part of the learning curve. First off you have to understand that you cannot refinance the properties with residential loans. You have to go commercial even on Single Family, 2-4 Unit and Townhome deals.

Sometime I get folk that look perplexed when I say commercial loan on residential properties. YES I DO MEAN COMMERCIAL LOANS ON RESIDENTIAL PROPERTIES. I have over 150 residential properties with commercial loans.

There is a lot I can go into but for this discussion it would be too much to type out. But to answer the question that someone asked in the above discussion you can get 75% LTV loans based on Appraised value all day long you just have to know what you are doing.

Does the bank require 20% Down on each deal?

Commercial banks do not require 20% down at all but the deal needs to bought and set up correctly and they will give you 75% of appraised value.

I can illustrate this with an example

Purchase Price: $ 60,000

Rehab: $ 20,000

Carrying Cost & Cost of Money: $ 7,000

Total Cost: $ 87,000

Appraised Value: $ 140,000

You can refinance: $ 140,000 X 0.75 = 105,000

So you refinance even more than you have in the deal. I NEVER DO THAT PERSONALLY BECAUSE I JUST HAPPEN TO BE VERY CONSERVATIVE but you can do it and it can be done in mass. You do need the right contact. A good understanding of Debt Coverage Ratios and other issue that a Commercial bank would look at.

Thanks

Andrew Holmes