All Forum Posts by: Account Closed

I would avoid Chicago/Cook County if at all possible. There is a new assessor that ran on a platform of reform. This past year, the North and West suburbs of Cook County were re-assessed under the new regime and while overall commercial property owners received an unpleasant shock, multifamily owners were particularly hit hard with higher assessments. The South Suburbs are being re-assessed this upcoming year (2020) and the City of Chicago itself in 2021. I can almost guarantee your property is looking at a significant assessment increase. At the very least, I would underwrite your RE Taxes assuming an assessor-assigned fair market value that is consistent with your purchase price. Cook County unnecessarily complicates the process used to calculate assessments and RE taxes. You will need to get familiar with the formulas. Finally, underscoring my advice to avoid Cook County altogether, I will add that the public employee pensions are severely underfunded. Elected officials are more than likely looking to shore these up via RE transfer taxes and overall RE tax increases. I hope you are successful in your endeavors.

Thanks Alina!

David & Chris...thank-you for the recommendations! Adding them to the list...appreciate the feedback

Preliminary review of their site indicates this is exactly what I was looking for...I'm looking forward to their outreach and overview of services... thank-you Brian

I'll check it out...most likely will be a combination of direct deposit and cutting checks...thank-you!

Seasons Greetings BP Community. I am hoping for recommendations with respect to software programs that will help report to investors, track capital accounts and distributions, etc., etc. If it matters, the property type is multifamily - student apartments. Any insights or recommendations are appreciated. Thank-you in advance.

You are starting young which is awesome. Time is one of the most powerful weapons you can have in your arsenal. Identify and start attending local real estate investment groups or clubs. Never forget that your net worth is in your network. The formula for success is straightforward: Gain Education; Add Hard Work; Apply the Knowledge Gained; Mix in Calculated Courage; and Constantly Practice Persistence.

Chris...assuming your projected NOI is fairly close at +/- $17,000, then you are purchasing property at a +/- 7.6% cap rate. This isn't all that bad. But its your cost of debt that is dragging this deal down. At the loan terms described and assuming the NOI is close, your cash-on-cash calculation of 5.0% is correct. One of the factors hurting your CoC return is the amortization period at 20 Yrs. For me, the amortization schedule is more important than the interest rate. It has a more meaningful impact on the cost of debt. I would try to get your amortization up to 25 years if at all possible - maybe in exchange for a slightly higher rate? (your rate is a little high too, but I understand if you are just starting out). Personally, I would keep looking unless you can your cost of debt down on this deal. A 5.0% CoC is not really worth the risk (hassle) of a 4-plex. Best of Luck and keep pushing forward...you are on the right track!

Loan origination fee of $10k is very high. We recently secured financing for a 28-unit deal in Bloomington IL and paid under $5k. DD cost of $14k also sounds on high end, but I don’t know how many or what reports/inspections your lender is requiring. Good luck ! 

Jay...first, thanks for the comments (and thank-you for actually reading the article!) Giving comparables to the appraiser (whether commercial or residential) is a great start and important step in managing the appraisal process. There is a whole lot more that can be done on the front end to manage the appraisal process and certainly steps to take on the back-end when the results impair your deal. This can all be accomplished without crossing the line with respect to Dodd-Frank's "no-no" of trying to influence the appraiser. This statute created a very grey area in terms of "influencing" the appraiser and there are many misconceptions out there on the borrower side. This is where I am hoping to help investors/owners. Finally, your CE instructor was spot on with the observations that the industry is losing talent on one end and not getting enough new people into the profession on the other. There most definitely will soon be a shortage. While much more complicated than this, I believe it boils down to fee compression occurring simultaneously with expanding education hurdles and increasing oversight/regulatory requirements (i.e. more work & liability). Simply put, appraisers are being asked to take less while providing more. And the pressure on both of these ends is only intensifying. For example, appraisal fees on the commercial side are the same, if not less, than they were in 1993 yet the regulatory/educational requirements placed on the appraiser have increased ten-fold. This is a profession that is in trouble. In addition to helping owners/investors, I am looking forward to pulling the curtain back a little on these issues in the Breaking the Appraiser series. Thanks again for checking-in & reading. Please reach out if you want to get more detailed.