All Forum Posts by: Anjelica Allen

 1. When you purchase an income producing property, you are also essentially purchasing the contracts/leases that go with that property.  Unless your contract has it in writing that the property will be delivered vacant.  If it's not in writing then the existing tenants will be your tenants once you close and it will be your responsibility to send them a notice that you or your company are the new owners and you do not intent to renew their lease. You must become familiar with the Chicago Residential Tenant Landlord Ordinance before you do this.  The ordinance specifies how much notice you must give a tenant depending on how long they have lived in the property.  

2. There are usually 2 choices for paying your homeowners insurance. Choice 1- PrePay before closing. Choice 2- Provide your insurance company with all of the relevant information, including the date of closing, your lender & the title company where you will be closing. The company will then send a bill to the title company that is applied at closing. It actually doesn't make much of a difference since the $ will be coming out of your pocket no matter what. Regarding grants- Most grants are available for downpayment and closing costs assistance depending on location of the property, credit, income level.... It's usually not a function of whether or not the loan is an FHA 203k.

3. I don't have enough information to provide you with any feedback on your loan estimate other than to compare line by line the original loan estimate versus what they are giving you now. 

I don't know how it is in the US, but in Canada we have a lawyer who handles closing. They check the title and do all that stuff.  If it was me, I'd sit down with my lawyer and go through the documents. That is what you are paying them to do.  People make mistakes, but going from $8K to $18K in closing costs is a big jump.  Ask the bank and lawyer what is different between the two estimates.

@Anjelica Allen

1.

What was the breakdown on the $18k for closing costs?

Response: The break down is extensive, I would have to know exactly what you need to see, for me to send.

2. Were you buying property with those tenants vacating? If there lease is in place you cannot raise rent on them until lease expires. If it’s month to month I would say you want them removed prior to closing and push the closing by 30 days to give them notice if you just

Response: The tenant is month to month, the tenants refuse to pay market value at the request of the seller. Seller stated to my lawyer that they wont send notice to vacate until closing. In their view if we don’t close they want to keep the tenant. I can not extend closing anymore, because it was already extended due to contractor issues. Extending could result in me losing the property.

3. Yes insurance is paid upfront and escrow is collected for the next years bill - you will also typically prepay some taxes as well

Response: Taxes are being cover by seller. I was not notified of the practice in paying up front on insurance which gave me hesitation. 

As mentioned get a real estate attorney or title company to walk you through every line item so you understand it

@Anjelica Allen- thanks ...depending on what type of commercial property you plan to buy -  you will liekly need to  have a sizable down payment  15-40% of price and  will likely need to use a  commercial loan which has  higher / different terms than a home loan does ....also -  assuming you  are  planning to live in one of the units of the  duplex -   consider  trying to  refinance  the loan  to a conventional  BEFORE   you  move  from it  in the future

Congrats! A duplex is a solid start.

Great advice above.

- Maximize rents and add value to boost the building value.

- Educate yourself in the commercial work, start networking with investors and brokers.

-Save and build up a "war chest" to invest in the next property.

@Anjelica Allen I am not that big of a fan of the 203k for newer investors, especially if capital is limited. I have seen clients of mine have more success using it to preserve capital when they have the cash instead of stretching to get construction work done. 

Maybe look into some of the low-down payment programs beyond FHA? We have had a lot of clients have success with 5% and 10% down portfolio loans here locally. Your dream of owning the commercial real estate will come soon enough!

 Most investors need to start with smaller residential properties before they get into commercial properties because it requires more capital (20-30% down in most cases). With residential properties, you can put a lot less down (0-10%) if you owner occupy depending on the exact loan and property type.

Unless you're making way more than you spend, it'll probably be a few years until you're ready to buy that commercial property.

So between now and then, focus your time on 2 things:

1. Getting educated

2. Building your network

You'll need to start underwriting tons of deals. Learning about different sub markets. Deciding if you want to get into multifamily, retail, storage, office, industrial, etc.

There's a lot to it. But you have time.