All Forum Posts by: Mark Doyle

Great point @Chanté Owens regarding him filing suit anyway and the insurer denying coverage.

Also, in the spirit of disclaimers, I am a former personal injury defense attorney with several insurance carriers as clients. I have defended many slip and fall cases for landlords.

Joshua,

First, you need to be careful about offering to settle without reporting the claim. It could be a violation of your insurance policy. They may never catch wind of it, but let's say someone else slips and falls, the insurer defends and at a deposition you disclose this prior slip and fall. Now the insurer knows and may have an avenue to deny coverage on the new claim. Just something to think about.

Slip and fall cases are very difficult for an injured person to win in Illinois. They had to have slipped on what is called an "unnatural accumulation of ice/snow". For example, a gutter directed to drain onto a sidewalk causes a frozen mess. If it snows and they slip on what fell from the sky, they can't recover. You are also protected by the Illinois Snow and Ice Removal Act, which is very favorable to residential real estate owners. http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2084&ChapterID=58

I would report to your insurance company and let them defend it. In the meantime, you can offer him some cash to move and get him out of there. Or start an eviction action. Chances are, if the insurance company fights the slip and fall, he won't recover.

Another thing to consider is if you offer him cash to resolve the slip and fall, and you are not using your insurer or attorney, are you going to have a valid release where he can't turn around and sue you anyway? It is just safer to report to insurance and take care of removing him from the building yourself.

@Steve Smith - I ran the numbers again just to make sure, but vacancy was included in my final numbers.

@Steven Hamilton II - I was using the 50% rule to analyze condos and thought I was finding a bunch of incredible deals. Then when I started plugging in the actual numbers I found that for condos in the area I'm looking, you need a rule a lot higher than 50% because the assessments are so high. So I don't use the 50% rule anymore for condos. I just plug in the assessments/taxes/cap ex/vacancy into my spreadsheet. When you do that, it is hard to find a condo where the numbers work out.

@Account Closed - I checked on the property taxes and there was a homeowners exemption for $800 in 2012. Thanks for catching that. As far as rents go, there is no garage but in this nice area of Oak Lawn, 2 bedrooms are renting between $950 and $1100 without a garage from the research I've done.

So with the new tax number - Cash flow per month is $189.21, for a cap rate of 8.79% and a cash on cash return of 18.92%. Still not bad, but I will adjust my offer to try to get back to 20%.

thanks for the responses. As of now, I've been told it allows rentals. I will learn more tomorrow. Good suggestion to call the management company. I will also confirm the taxes. And I do plan to stuff the building financial statements.

honestly the maintenance number is just an educated guess, and could certainly be where my analysis is flawed. That's why I posted. Assessments will take care of all exterior maintenance. So the maintenance number really will just be paint/carpet every couple years, the occasional appliance/plumbing/other random repair, and any unexpected special assessments that may come up. I figured a budget of $1000/year should cover that. If someone thinks I should raise that budget, please let me know. Better to adjust my numbers now.

Looking to make an offer on my first rental property. It is a two bedroom, one bath condo unit in Oak Lawn, a southwest suburb of Chicago. Neighborhood is a nice, middle class area.

Listed as short sale on MLS for $60,000.

Market rent in the area is $1000/month.

Assessments are $2,364/year.

Taxes are $1,354/year.

Insurance is $600/year.

I estimated maintenance/cap ex in addition to assessments to be $1,000/year.

I estimated vacancy at 5%, or $600/year.

At 20% down, my principal/interest payments on a 30 year loan would be $250/month.

Water and garbage are paid out of the assessments, so that is an additional $0.

I will manage the property myself. So property management is $0.

So plugging all those numbers in, here are the results:

Total rental income per year - $12,000

Total expenses per year - $5,918

NOI - $6,082

Cash flow per month - $256.44.

Cap rate - 10.14%

Cash on Cash return - 25.64% (Property is turnkey. No money needs to be put into it upon purchase).

Seems like a great deal. Anyone see any flaws in my analysis? Thanks in advance for any help!