All Forum Posts by: Chris Kelch

@David S. as others have said, it's not real estate specific. it's almost like you're asking 'but why capitalism?' Asking the question 'why is everyone taking all the houses' doesn't gain you anything, because what other people do with their time and money is outside of your control. 

Somewhat of a side point: 

Consider areas that still remain largely untouched by investors. They are affordable but extremely dilapidated and no one wants to live there. Due to competition investors update properties, creating better living conditions whether their goal is for profit or not.  

To answer your question, I would avoid those areas. 

Like you said, it's going to be a bloody, uphill climb and no one is willing to pay more for a neighborhood that is predominantly worn down. I'd imagine the profits on the first couple of flips will be weak and it will be tough to build enough momentum / capital to keep going.  

Why try to take a neighborhood on yourself when it sounds like there is also neighborhoods around you where you can ride the the wave? It's signing up for huge unnecessary risk and uncertainty right out of the starting gate versus building easier wins in a neighborhood that is more predictably heading in the right direction. 

Pulling this from JScotts book: 

Max Purchase Price = Sales Price - Fixed Costs - Profit - Rehab Costs

In this case 'Sales Price' is your best estimate at what you'll appraise at after repairs. 'Fixed Costs' are fees, commissions, and don't forget holding costs (taxes, utilities, etc.) while you do the repairs. 

You may need to fund the property up front with a partner or private money while you do the repairs. After you do the repairs you can cash out refinance. This refinance will be based on what you appraise at after the repairs are complete (75/25 or 70/30). You can get a lower interest rate and pay back your private lender or partners with the cash out. 

I've rented in a few markets where window AC units are the standard. However, even if this is the case, central AC may give your property an edge over the others. 

Pricing can very widely depending on your area, layout of your duplex, size, etc. If you decide it's worth it considering your market / predicted rent / renters then I would do some research to cost it out and/or get quotes and factor that in as either an immediate repair cost or a future capital expenditure. 

I stumbled on the BP podcast via itunes and checked out the site after listening to the episode

also worth thinking about - the type of property you purchase/rent out drives the type of tenant you attract. I think that applies within the college setting as well.

when I was in school there was a range of different properties on campus - from up to date, well kept, 2-4 bedrooms all the way to 12 bedroom slums that served as pass-down senior houses. no judgement towards those tenants living in the the latter but as a tenant myself, I would be more likely to beat the crap out of the 12 bedroom as there is less guilt subconsciously since it is already in bad shape.

Hey Eric, 

I'm not sure about any meetups in the SW suburbs, but there is a couple that I know of in the Downers Grove / Lisle area if you're willing to make the trek: 

DuPage County Real Estate Investors

Lifetime Cashflow w Multifamily Real Estate Chicago Meetup

I have not yet attended the second one I listed. Unfortunately both of these are scheduled the same Wednesday of each month. Both are networking focused / no pitching. 

At the first one I listed, some folks have properties throughout the suburbs, and I'm sure there is someone who overlaps with your target area. I bet it's a similar situation with the second. 

I've noticed at least for the Chicago area meet ups are mainly driven through meetup.com. Sometimes event links are copied over to biggerpockets but sometimes not. 

Hey Ian, 

I'm not as familiar with neighborhoods in the city so don't take my word but I've heard here and there that you'd want to start by analyzing properties just on the fringe of the newly developed areas to the west and northwest. Like you mentioned, there are many suburbs that have properties where the numbers may work. 

I would not knock on peoples doors without knowing what you're doing or try and catch up to the cash buyers. I would recommend taking your time to make sure your real estate education is in a solid spot, continue to get involved at meet ups and forums, pick an area, and continue to build both a team and lead generating sources in that specific area: relationships that you build, continue with your agent, wholesalers, maybe start to explore auctions if you're a cash buyer (be careful though), conduct your own searches online, etc. Like they say a lot on the BP podcast these days, you've got to extend the outside of the funnel to be HUGE to make a few offers to get one deal. 

I understand your fear on analysis paralysis taking a permanent grip but being patient is better than rushing into a bad deal. 

Hi Spencer, 

There's nothing wrong waiting things out on the sidelines, especially if you're not exactly comfortable with where things are at in terms of the market cycle. It's a good opportunity for new investors like us to get well versed in real estate and make sure our real estate education is in a good spot (via the podcasts, books, etc.). Also note that although it is a really hot market, no one really knows when the next downturn will be. 

There are certainly non-distressed properties where the numbers will work. It just may not be in your city. Once you pick the area you want to invest in you'll have to really be aggressive about building multiple lead sources including relationships that you build, turnkey sites (make sure to run the numbers yourself, be careful, and do your own diligence), getting an agent, and doing your own searches on the internet. 

In this kind of market one may need hundreds of leads to make a hundred offers to get less than 5 of those offers accepted. It's a huge hurdle and I've been struggling with it as well. This "funnel" concept is a recurring topic on the BP podcast these days. 

Hey Joshua, 

It's very case by case, not a one size fits all answer to this. LLCs can add an extra layer of liability protection (in addition to following code, using licensed contractors, having an umbrella policy) but working in LLCs prohibits use of conventional loans. It's dependent on size and the amount of assets that you need to protect. 

Check out these BP blog articles for more details: 

The Pros & Cons of Using a New LLC for Every Property Purchase

Yes, You Absolutely SHOULD Use an LLC to Invest in Real Estate: A Counterargument

5 Reasons I Do NOT Invest in Real Estate Using An LLC

Is Filing Your Real Estate Business As An LLC Your Best Option?

Top 3 Real Estate LLC Myths: Busted!