All Forum Posts by: Christopher S.

Those are some great Chicago neighborhoods.

While the Johnson Administration has signaled a change to how the administration is going to carry on the initiative, you should look at some of the projects that the City is supporting through the Lightfoot Administration's Invest South/West program in those neighborhoods to identify whether your potential projects are near those other investments such as along 79th Street in South Shore.

https://www.chicago.gov/city/en/sites/invest_sw/home/south-s...

Good luck with your projects. 

Oh in hindsight it was highway robbery but we were fresh out of school and the place was super cheap to start with so we didn't appreciate that we paid off that terrible washer in about 5 months. Good learning lessons and a fun reflection on the first apartment my wife and I shared. 

@Corby Goade

When I was still a renter here in Chicago our landlord added a dishwasher and charged us $50/month additional after that.

@Brandon Campbell

Hi Brandon,

What sort of liens are we talking about. The building department is very unlikely to play ball or reduce fines in Chicago or give you any waiver.

You really should negotiate the fine price into the sale or make the seller pay the fines first.

Once you get the property though and have a clear plan to address the issues, the inspectors may take awhile to get to you but are generally pretty good about getting the issues sorted out and cleared.

Happy to help with insight.

Out of curiosity whereabouts are you thinking of buying?

Have a great weekend.

Chris

18th Street is a priority corridor within Pilsen for development by the City and the local Alderman, especially on the western end of the corridor by the the Pink line station. Any property that you can make the numbers work for is very much in the westward path of development that is occurring in Pilsen.

Being by the 18th St Pink line is also a boon as Pilsen is a very transit and street connectivity challenged area so having the station will be a benefit for your tenants and foot traffic of any commercial tenants.

I concur the area feels fairly safe now at night as well as during the day.

Good luck with the project.

@Jerry N. I work in financial analysis consulting for real estate deal involving financial incentives (TIF and property tax incentives mostly) in the Chicago region but have friends that work on the financing of affordable housing deals.
I asked a friend for the name of a couple people that specialize in doing that type of tax credit consulting in Chicago and will reach out to you separately with that info when I hear back.

Have a great rest of your week.

-Chris

Jerry,

If you are pursuing the LIHTC then generally your first stop should be to talk to the municipality in question. They generally have an allotment of the 9% tax credits that is more competitive and a larger amount of the 4% tax credits.

In Chicago the 9% is done on a rolling 2-year funding round sequence and is highly competitive among the affordable developers that operate in the City. Process takes a long time to go through though it might be shorter with smaller municipalities.

4% are easier to get but you generally are getting a much less valuable thing to exchange on the market so you need a lot more tax credit to get similar amounts of equity.

I normally see projects of at least 20-30 units before the math is really viable given the extra costs/time involved.

Good luck with your project Jerry.

-Chris

The Opportunity Zone program was enacted as part of the 2019 Federal tax law. It will not help you on your operating costs unfortunately but if you hold a property in a Op Zone for 10 years the property's basis steps up to present value and wipes out your tax liability on sale for any growth in value. It's another program targeted at community development but can be very lucrative in a neighborhood that is on the cusp of rapid development since if the Building was worth $3M 10 years from now that would be the new basis at sale so you would have no Federal Cap gains to pay. Sorta like a 1031 with an exit plan.

For MA, here is the map showing where zones are.

MA Opportunity Zone Presentation

MA Opportunity Zone Map

No local or state involvement or agreements needed. Just has to do with properly managing the money you put into your deal like when you 1031 and filing a federal tax form.

Good luck with your project.

Hey Rich and Zach,

Couple red flags on this I wanted to point out. The base EAV (equalized assessed value) for a TIF district is established at the start of a TIF district and the incremental EAV increases from there. The amount of actual revenue is based on that incremental share applied to the actual property tax bill you paid. In this case the Base amount is critical because that changes everything. Also, the age of the District matters as when they expire they cannot reimburse you anymore so knowing how many years are left is key. A district with only 5 years left would kill the 9 year assumption above.

Here is a little example of the math for Base EAV implications.

	Scenario 1	Scenario 2
Base EAV	100,000	120,000
After-Rehab EAV	200,000	200,000
Incremental EAV	100,000	80,000
Property Tax Rate	5%	5%
Property Tax Bill	10,000	10,000
Base Property Taxes	5,000	6,000
Incremental (TIF) Property Taxes	5,000	4,000

Second if you are not in a TIF district already as you state, it can be a huge legislative headache on the municipality's part to expand the boundary to include your property. In Illinois for example it requires both local city council actions and studies, but also authorizing legislation from Springfield too. Not sure on the specifics of MA but in my experience it's easier to do a project already in a TIF than to get the boundary changed. At minimum that aspect alone could add a few months, not including the negotiation over a redevelopment agreement and terms.

TIF deals are going to come with a redevelopment agreement that holds you to terms with the City in exchange for the money. In some cases they will only pay you out over time reimbursing you in the following calendar year after the property taxes were paid as a TIF may not have the amount on hand or the City might not be willing to issue a note so that you get the cash up front. Some also have clawbacks for excess profit. The term length is often lasts 10 years and can include restrictions on sale during the term. Perhaps the most dangerous for investors that are not aware is if the City requires Prevailing Wage which can instantly increase your construction costs 30-40%.

If you want a good reference on TIFs from the largest program in the country, https://www.chicago.gov/content/dam/city/depts/dcd/general/2... from City of Chicago gives a good background to start. 

If structured right TIF can be a great tool but just realize that you are signing up for a much longer design/planning phase, and a long-term agreement with the City that is recorded against the property.

In your case, I think Zach is right to recommend an Opportunity Zone if you are in one as an easier incentive type. Good luck on your project.