All Forum Posts by: Andrew Holmes

@Garrett W Williams

A bunch of folks have said it already. Chicagoland is a huge area. 

1. Area Selection (Based on ideally where you want to be. Don't picked the coolest spot. A little off the coolest spot is best. You can be cool or build wealth. Can't do both in most cases) Example a lot of people love Oak Park. It's a cool are but I would pick. Galewood certainly not as cool but you can find pockets with good value. There are tons of pockets like that but be prepared to really go some home work. 

2. Property Type: This will be dictated by area (Single Family vs 2 - 4 Flat)

3. Property Selection: Does that particular property make sense for you and then rental in the future or can you live in one and rent out the other etc. 

3. Amount of rehab (Stick to a reasonable number on this don't be too ambitious)

4. How much money do you have? How will you finance it? Where will the funding come from? Refi.

5. Tenant Quality

6. Long term strategy?

Someone also mentioned Aurora, Elgin both are great to the most extent. There are tons of other pockets but first you will have to narrow down a couple of areas. Stay out of areas that are way too adventurous as a new investor. Better to be safe than sorry. Spend more time looking for deals. When we are new we have a tendency to try to force the hand of the market. Can't do that. You have to identify the area and start hunting. It is frustrating but it's just a part of finding a great deal. A lot of time as new investors people get in and if they don't find what they think is a deal they either quit or buy and then justify what ever is in front of them. Please try to avoid that. Most mistakes originate from paying way too much for a property. 

Average sale price of a MLS sale is not a good way of looking at if you have a good deal. Not in all cases but in a lot of cases average MLS prices are way too much for investment. As an investor we need a deal that is the reason we are not called retail buyers. A lot of time people will buy deals at a market price and they make the numbers work. Personally that is not investing. As a new investor be patient and that is the hardest thing to do even for people that have been in the industry for a long time. Wish you the best.

@Jorge Leon It all depends on your cost basis in a property. Just a suggestion. Don't buy based on appreciation, buy based on the basic fundamentals. Equity (May have to be forced equity based on rehab), cash flow, DCR (Debt Coverage Ratio).

Next is depend on your style of investing. NW suburbs and western suburbs are tough in terms of finding real values unless you really go off market for properties. Far west and south suburbs you can find value as well as great cash flow but all the suburbs are not the same. Some have no commercial base so the taxes are very high. Even through you can find the properties relatively cheap the taxes are high. Also consider the tenant base. There are suburbs where you can still pick up reasonable numbers in terms of purchase prices but the area economics is not good. 

If you have a good chunk of change to deploy. Look for a off market strategy to find deals with good cost basis at the end of the day all the numbers fall in place when you cost basis is right. Purchase + Rehab. Chicagoland area does have a tough climate for landlords yet because that hill is steep the cash flow and the values that you can find here are really pretty wide but right now you have to look for deals off market. 

Obviously NW Indiana is an are people often point out but again the parts that are good solid B areas the you have to go off market to really find good value. 

When you are thinking about deploying capital in a market I would consider a good deal finding strategy rather than just forcing MLS deals.

@Eric Anderson You will probably find some the best and worst in that area. Huge opportunities and just a few blocks away all kinds of issues. A lot of people have come gone into south side and gotten wiped out but then others have done well. @Mark Ainley and few others have mentioned block selection and property management is really critical. It's a large area and lots of pockets so easy to make a mistake. Try to work with someone that are really knows the area well and has a long term management exp. Mark & his company may be a great place to start.  

If it's your first home then buy it with cash. Rehab and the do a cash out refi at residential rates 30 yr fixed. Or borrow money for the purchase and rehab. Make sure that that's the wire that is coming in on the day of the closing and that amount is reflected on your HUD statement as a loan.

As long as it’s properly documented with a mortgage and a note. With the exact amount of purchase plus rehab properly shown on the hud. You can fix up the property and refinance it right away without waiting six months that will be your cheapest option as owner occupied 

@Shahab Siddique

Great to see that you guys have saved and done well professionally. Great start but when you are doing fix and flips you cannot look at it like a regular home purchase. The banks that generally have the lowest rates will not give you a loan on a fix and flip. That does not mean that you have to pay an exorbitant rate either. 

With a case like your you should consider opening a Credit Line for flips & rentals. (This does not mean a credit card line) There are lenders that are real estate specific will easily give you 

Liquid Assets * 3 in a line. So in your case 500,000 * 3 about 1.5 Million with a 2 points and 8 or so in terms of the rate. 

So you will only have to bring 10% to 15% of the purchase to the table. They will but 85% of the purchase and 100% of the rehab. 

Please note there are a lot of variations of this program and will be lender specific. Even through you have the cash they lender may not open up the entire line if you do not have the experience. As you do your first 2 or 3 projects your line will open up pretty quickly since you have strong W2's, Saving and credit. These products are based on experience and less on the rest but you will be able to present a strong borrower profile and that will help you. 

Don't be very as sensitive on the rate you have look at the whole things. 

1. Points

2. Rates

3. Amount of purchase they are lending this will dictate how much you have to bring and downpayment

4. Amount of rehab they will fund

5. Draw schedule and how much they charge for each draw and the process

6. Other doc prep fees at closing

7. Term of the loan (6 months vs up to 2 years this is also dependent on the lender)

On some deals if you have cash it may not makes sense to take a loan because you may have to move very fast. On others using OPM makes all the sense in the world even if you pay a little more in interest but it's evaluating the whole thing. 

If you can make the numbers work. Seems like they are very professional.

Be careful with Evanston. Evanston is a great place to live but not the friendliest place to do anything. @Russell W. pointed out a few things like. You may have to bring a wholes new waterline with a larger diameter line. Gas and other considerations. Also the building codes. 

At that point how does it have an impact on taxes because you are going to have to submit plans and the whole bit to the city of Evanston. I would run all those numbers and talk with an architect that is familiar with Evanston and the codes. 

@Sean McKee - We own over 200 properties here in the Chicagoland area but I really never showed the property while it is occupied. I know some landlords advertise that they do that. But we haven’t really showed occupied properties. I think during normal times it wouldn’t be an issue as long as you know the property is going to show well and your tenants are willing to cooperate. During Covid that can be rather challenging. 

@Kp Methuku - Look for some basics if you looking for a mentor. 

1. Are you actually buying properties?

2. What properties and addresses?

3. Look up those properties online? Where were they bought? How much? What is game plan and strategy? 

The biggest thing you should look for is that person who lives the message. It's very easy to give advise in real estate. It's tough to implement it for yourself. You should look for help from some one that "Lives what they preach. Do they have the results in term of actual real estate owned". 

Bigger pockets a wonderful place for ideas, thoughts and learning. The problem with real estate is that it is hands on. 

When you get started in the real estate journey we all fall into the trap of listening to someone that sound great. What they say makes sense because we don't know what to ask and look for. A lot of times what makes sense in a seminar is not the reality of investing. 

Don't believe the first person that seem credible. Do some research and homework at the end of the day it's about your goal are you looking to build an active or passive income with real estate. Once you have that narrowed down it's going to boil down to 

1. Area Selection based on the goal

2. Property Selection (Price & Type of property)

3. Rehab Amount (How much are you willing to and able to rehab to increase value and so on)

4. Under standing the numbers (Purchase, Finance, Rehab, Carrying Costs, Sales Costs etc)

Hope that helps. Wish you the best. 

@Paul De Luca - The south suburbs do dominate the statistics because the price range. 

The rehab amounts are lower so they can be done within a few months. And the property show up a double closed within 12 months. In the north because of the price range is higher generally rehabs are longer so that it sats skews In favor of the southern suburbs. 

We only go up to 12 months in terms of tracking the flip stats.