All Forum Posts by: Elliott Kim

Hi Crystal,

Thanks for the honest input. It definitely makes sense that if all properties in the area are converted to modern, my current go-to-market rental plan will not stay competitive. However, do you believe there could still be a market available for houses with radiators? I've heard that radiators actually heat better than forced air. Another benefit is that they do not dry up the air like central air. I cannot speak for myself as I've never lived in a home with radiators, this is all anecdotal evidence. 

In your experience, have you heard of tenants who hold his opinion? In regards to cooling, I'd foot the electricity bill so even though window AC units are not as effective, potential tenants see an appeal of paying just one rental bill. 

 Yeah I really hope my location will support my rental ask. It's a couple minutes away from the Belmont stop, right by the highway, easy transportation to downtown Logan, Milwaukee Ave, and to the Loop!

 Hi Frank, 

Your comment about the booster pumps accelerating sedimentation and leakages was my original thought when the plumber told me to install it instead of replacing pipes. Do plumbers provide services to clean aerators and/or risers? Is this something I can do?

I will plan on replacing the 40 gallon to a 75. It's nice to hear that assurance from a professional like yourself!

Thank you,

Elliott

 That's very reassuring Jake! In your experience, do you think the $1400-1600 rental ask is appropriate for units without central air/heat? My property uses radiators for heat and window AC units. 

 The seller had his family and extended family living in the house. I picked the lower range of a 3 bed 2 bath duplex-up rental price for properties in close proximity to the Belmont stop. The finished attic actually has a gigantic bedroom set-up now, could maybe split it in half for a 4bed2bath... 

My comps are showing $1300-1600 for 2bed1bath for the properties in close proximity to the Belmont stop, like within 8 minutes of walking distance. So could the location explain the premium in rental pricing?

We are planning to ask for a sellers credit for the couple of windows that aren't functioning properly. We're planning on replacing the water heater tank to a 75 gallon to adequately heat the whole house. Do you recommend this or installing a 2nd 40 gallon water heater? Taxes were shown net after senior freeze and occupancy exemptions. I've included in my cash flow model the gross annual tax amount of $5000 after adding back the exemption amounts found on the cook county tax portal website.

Will hear back on electric, thanks for the pricing estimate!

Thanks a lot for the input, Frank!

Dorothy... you found a huge error I made which is to only include the 1st installment of the water bill! Considering the 2nd installment as well, the monthly expenses increase by $70, resulting in a complete break-even net cash flow. 

Room sizes are great - able to fit full sized beds with their own closets. Not a den/nursery room you find in many Chicago properties. Market rental comps have shown to be around $1500, but from the sample size I saw they seem to be more modern/renovated. In my logic I subtracted $300 because it's not modern, added $100 for cosmetic appeal value, and added $100 to cover gas bill, bringing my rental ask to $1400.

We've heard the same possible issue from a plumber - that a 40 gallon won't heat properly. Plan now is to install a 75 gallon in place of the 40. 

I will definitely consider re-piping galvanized to copper! Gotta talk to the plumber on prices.

Thanks for the input!

Hi Dorothy, 

Thanks for your input. May I ask which part of the numbers do not make sense? I've included utility figures as part of the calculation based on the bills the seller provided. All in, I break-even while living in the basement unit. Are you saying that these utility costs will increase after I bring in tenants? 

I'd say overall the units are in good shape for immediate move-in. They are not furnished with modern finishes, but everything is structurally sound. I am planning on stripping out the cheap floors (made out of plastic material) to sand and polish out the wooden floors underneath. I'm also adding stainless steel appliance and doing paint again myself. Overall, minimal cosmetic repairs - would this justify the rent upcharge? 

Also, does your property with the booster pump have water pressure issues now? If so, how have you resolved this issue?

Hello BiggerPockets,

After about half a year of learning and searching for my first investment property, I've finally found a property which I plan to “house-hack”. We are in contract now and the inspection period ends next week.

Here are the details:

Location: City of Chicago, Neighborhood of Avondale/Logan Square; 3 minute walk to a blue line subway station (26 minute door to door commute to the loop).

Market: The area has seen growth in both property value and development. If the historic pattern of real estate development follows its neighboring markets along the subway line (such as Wicker Park), this area will gentrify rapidly and see significant appreciation.

Property: Legal 2 units with finished basement and finished attic. In total, three rentable units: 1) Basement 2bed1bath, 2) Floor 1 2bed1bath 3) Floor 2 duplexed-up to attic 3bed2bath.

Numbers:

Purchase price = $460k,

Monthly Income: Basement = Occupy, Unit 2 = 1400, Unit 3 =1900, Parking = 100; Total Monthly Income = 3400

Monthly Expenses: PITI = (2800), Others (vacancy, repairs, utilities) = (530); Total Monthly Expenses =

(3330)

Monthly Net Cash Flow = 74 (essentially break-even)

Property Details & Issues:

HVAC = None. The house has one shared gas bill with a steam-powered boiler providing heat through radiators in only floors 1 and 2, leaving the basement and attic floors with no heat. For electric, the house has two electrical meters (one for floor 1 + basement, one for floor 2 + attic). Currently the owners use space heaters for the attic and claim minimal space heaters are needed for the basement because the boiler located there provides enough heat from itself. During warm seasons, AC window units are used for all units.

Water Plumbing = There seems to be weak water pressure particularly in the attic floor when multiple drivers (toilet, shower, sink) are used at once. Pipes are generally galvanized in material.

Water Heater = There is only one 40 gallon tank in basement for the whole house.

Questions: I don't have money for too large of a rehab project. Therefore, I'm planning to minimize rehab costs and bring the property to rent as quickly as possible.

• 1) Since it’s impossible to separately meter radiators, and too costly to convert to forced air, I’m thinking of footing the gas bill and covering the cost through an upcharge of rent (these values are reflected in “numbers” portion above). Would tenants find this attractive? To counter the risk of tenants running the bill over my estimated average, is there a way to implement a sort of pay-for-extra comfort bill?

• 2) Currently there is one master thermostat for the radiators in the 2nd floor – is it an easy/cheap process to change that master to the basement where we will live? How would I manage controlling heat once I move out?

• 3) For electricity, I’d just have to split the meters between floor 1 and the basement. Is this easy to do?

• 4) For the water, I’ve been suggested by a plumber to install a booster pump to fix the pressure issue. Can anyone attest to the effectiveness of this addition? Also, would it be advisable to install a 2nd water heater or can I replace the 40 gallon with a 75 gallon?

• 5) Finally, this question isn’t related to the property, but the scalability of my future real estate portfolio. My partner and I currently have contracted to finance this property through a 5% down owner-occupy conventional loan. The restriction of concern is that you can't use this loan if you have any other properties under your name. With this property’s current numbers, my partner and I would BOTH have to put our names on the mortgage in order to qualify the debt-to-income ratio. Would it be advisable to skip this property to look for another one where only one of us would title the loan? This way, the other partner can leverage the same low money down program for a 2nd property relatively quickly thereafter? Multi-family properties are expensive in Chicago so future purchases through standard 20% down conventional loans would take me years of savings.

If you took the time to read through my wall of text, I want to thank you for your time and consideration! Any bit of advice/information would be greatly appreciated.

Thanks,

Elliott

Hello BiggerPockets,

After about half a year of learning and searching for my first investment property, I've finally found a property which I plan to “house-hack”. We are in contract now and the inspection period ends next week.

Here are the details:

Location: City of Chicago, Neighborhood of Avondale/Logan Square; 3 minute walk to a blue line subway station (26 minute door to door commute to the loop).

Market: The area has seen growth in both property value and development. If the historic pattern of real estate development follows its neighboring markets along the subway line (such as Wicker Park), this area will gentrify rapidly and see significant appreciation.

Property: Legal 2 units with finished basement and finished attic. In total, three rentable units: 1) Basement 2bed1bath, 2) Floor 1 2bed1bath 3) Floor 2 duplexed-up to attic 3bed2bath.

Numbers:

Purchase price = $460k,

Monthly Income: Basement = Occupy, Unit 2 = 1400, Unit 3 =1900, Parking = 100; Total Monthly Income = 3400

Monthly Expenses: PITI = (2800), Others (vacancy, repairs, utilities) = (530); Total Monthly Expenses =

(3330)

Monthly Net Cash Flow = 74 (essentially break-even)

Property Details & Issues:

HVAC = None. The house has one shared gas bill with a steam-powered boiler providing heat through radiators in only floors 1 and 2, leaving the basement and attic floors with no heat. For electric, the house has two electrical meters (one for floor 1 + basement, one for floor 2 + attic). Currently the owners use space heaters for the attic and claim minimal space heaters are needed for the basement because the boiler located there provides enough heat from itself. During warm seasons, AC window units are used for all units.

Water Plumbing = There seems to be weak water pressure particularly in the attic floor when multiple drivers (toilet, shower, sink) are used at once. Pipes are generally galvanized in material.

Water Heater = There is only one 40 gallon tank in basement for the whole house.

Questions: I don't have money for too large of a rehab project. Therefore, I'm planning to minimize rehab costs and bring the property to rent as quickly as possible.

• 1) Since it’s impossible to separately meter radiators, and too costly to convert to forced air, I’m thinking of footing the gas bill and covering the cost through an upcharge of rent (these values are reflected in “numbers” portion above). Would tenants find this attractive? To counter the risk of tenants running the bill over my estimated average, is there a way to implement a sort of pay-for-extra comfort bill?
• 2) Currently there is one master thermostat for the radiators in the 2nd floor – is it an easy/cheap process to change that master to the basement where we will live? How would I manage controlling heat once I move out?
• 3) For electricity, I’d just have to split the meters between floor 1 and the basement. Is this easy to do?
• 4) For the water, I’ve been suggested by a plumber to install a booster pump to fix the pressure issue. Can anyone attest to the effectiveness of this addition? Also, would it be advisable to install a 2nd water heater or can I replace the 40 gallon with a 75 gallon?
• 5) Finally, this question isn’t related to the property, but the scalability of my future real estate portfolio. My partner and I currently have contracted to finance this property through a 5% down owner-occupy conventional loan. The restriction of concern is that you can't use this loan if you have any other properties under your name. With this property’s current numbers, my partner and I would BOTH have to put our names on the mortgage in order to qualify the debt-to-income ratio. Would it be advisable to skip this property to look for another one where only one of us would title the loan? This way, the other partner can leverage the same low money down program for a 2nd property relatively quickly thereafter? Multi-family properties are expensive in Chicago so future purchases through standard 20% down conventional loans would take me years of savings.

If you took the time to read through my wall of text, I want to thank you for your time and consideration! Any bit of advice/information would be greatly appreciated.

Thanks,

Elliott