All Forum Posts by: Elliot Rudmann

Oh weird. It popped back up on Redfin this morning, however, it did that a few weeks ago and then disappeared. Glad it's still under contract! 

Hey Brie, did this zoning-cert issue end up getting fixed? I see the property is back on the market. Interested to hear how this all played out. 

An RS3 zoned structure can still have 3 units if it were grandfathered in before 1957 zoning ordinance. It's likely that the agent who owns this property can prove with a zoning certificate that it has 3 legal dwelling units, though it would ultimately be up to the buyer's due diligence to prove such. 

While it may cashflow now, my concerns would be higher maintenance costs and tenant quality/stability issues that stem from the overall functional obsolescence that's present in a lot of Chicago's 100+ year old housing stock. This is hardly what I would consider a "turnkey investment". 

@Henry Lazerow 5% down with no PMI at those rates? Sounds too good to be true. Would love to get more info about this type of loan.

David - imo it's absolutely not worth it then for $75k less. That's a joke, and it's a shame that the seller and seller's agent have wasted your time not doing proper due diligence before marketing this place as a 3-flat. For a six figure discount from your original offer, it may be worth buying it as a two flat and taking the time, effort, and money to try to get that garden unit certified but there's still no guarantee that it could be done; to me a $75k discount isn't worth that risk of failure unless you think the numbers could still work as a two flat (after paying to have the first floor duplexed down). You'll obviously get more rent from the larger sq/footage first floor duplex but not as much than if it were a separate unit. 

Chicago realtors should mandate that owners selling a 2-4 unit should prove the legality of those units before listing by supplying a zoning cert; it's a ~$150 cost that they have to eat anyway. Instead, it's always a big surprise in the attorney review period and then when it's discovered both sides of realtors always seem to push the buyer to just accept it; very deceiving practice. 

The real question is how much cash -- after all expenses and retirement contributions (Roth, 401k, etc) -- are you able to save each month? Take that number and extrapolate if you'll have enough after 3 years of saving it in cash to put towards your next place, if not, maybe it's worth cutting back on those retirement contributions; though personally I think contributing to a Roth is a no-brainer. For your 401k, it's always worth contributing up to the match. I would just eliminate the $1k student loan and CC debt for peace of mind. 

What is your budget for the next place? Have you spoken with your lender about how what sort of financing options would be available for your second property? I ask because your DTI may be too high for 80-95% LTV financing, though if you have a lot of equity in your existing property you could leverage it to purchase your next one.

"I would like to buy one unit in a triplex and build enough equity to purchase the entire triplex." - I am a bit confused by this statement. If you buy one unit in a triplex of condos, how would go about purchasing the other owned units? What if someone doesn't want to sell? Or are you talking about owner-occupying a triplex and renting the other two units out? 

I would consider delegating all of that $12k cash as your emergency fund, as surprises tend to pop up when owning real estate, less so with condos, but there are still plenty of variables that can disrupt your financial growth. 

What is your holding period for the $15k in semi-liquid investments? Are those long term investments you won't touch until retirement or will they supplement your down payment? If they're "semi-liquid" (private REITs?) I would look into the difficulties and time needed to liquidate so you don't cause any delays in the (future) closing process. 

@David Triplo - 

I would recommend submitting a FOIA request with the Department of Water Management. The last time I did it their email was DWMFOIA(at)cityofchicago.org - it couldn't hurt to try; this could be the smoking gun you need. 

Specifically request water service records (pre-1958) that exist for that property to verify all existing dwelling units at that time. 

@David Triplo - my wife and I went through this process on a house we almost ended up purchasing in Chicago. It was a two-flat  with a coach house in the back, essentially being marketed as a 3-unit. When the zoning certificate came back as showing only two dwelling units, we felt very deceived and threatened to kill the deal. The seller's agent got the water records showing that the third unit (coach house) existed before the 1957 zoning ordinance, and then she got the zoning certificate changed to 3 units; and it's worth noting that this property was zoned RS3, not RT4. So contrary to popular opinion, you do NOT need to get the whole property upzoned to RT4 for this to work. In your situation there is a way to get 3-units certified on a RS3 zoned property.

I disagree with others here who are saying to just buy it as a two-flat. I would strongly urge you to buy this property as a 3-unit, as it will be so much more valuable in the future, especially in a neighborhood like Lincoln Park. It looks like you have plenty of evidence to prove that the third unit has existed for quite some time. You have the most leverage you'll probably ever have to get the zoning-cert changed now, before you buy the place, otherwise you'll likely have to pay thousands of dollars to a well-connected zoning attorney. If you buy it as a two-unit, do whatever it takes to change it to a third unit. 

Is it possible to extend the deal while this gets worked out? The seller's agent and attorney should be scrambling to get that third unit certified so the property sells at its original, higher value.  

Please let us know what happens. 

@Kumar Tummalapalli - the lot size restriction there is ridiculous and should not be applicable to the city of Chicago. I don't have data on how many lots in the city are >6500sq/ft but I'd imagine it's very few. Implementing a lot size restriction that big that in the city would render the change useless for all but the uber rich. Considering how progressive Oak Park generally is -- or claims to be -- I'm surprised they stuck that restriction in. Better than nothing I guess, but hopefully Chicago gets it right. 

Chicago investors/landlords: I'm curious to know what your thoughts are on this potential change. Mayor Emanuel's latest five-year housing plan (passed in December by the City Council) included a section that mentioned accessory dwellings. "The City will identify options to leverage building codes or zoning to create affordability through accessory dwelling units (ADU)".

There has been a national push towards adopting pro-ADU legislation and upzoning. Minneapolis just radically changed their zoning (allowing three-flats to be built on some previous SFH zoned lots). Oak Park now allows coach houses (if your lot is big enough). Denver, Portland, and LA - to name a few - already allow ADUs with certain restrictions, yet Chicago has generally banned them since 1957.

With Chicago losing so many housing units from multifamily de-conversions to single family homes, I think adopting more ADU-friendly zoning would help naturally restore these lost units and bring back some affordability, which would help Chicago's economy long term. It would also help increase income for homeowners/landlords and increase work for builders and architects. I've definitely thought about converting my unfinished basement to a small apartment or putting up a garage with a 1bd/1bth on top to help increase cash flow, but it's not realistic without attempting the virtually impossible (and expensive) task of trying to spot-upzone my property. There would be a lot of things the city would need to figure out (infrastructure impact comes to mind) but overall this seems like a great way to add density while preserving the neighborhood character and giving some power back to homeowners and landlords. 

There's a related petition circulating right now that I've signed that I think a lot of Chicago people on BP would support: https://www.change.org/p/chicago-city-council-re-legalize-coach-houses-and-similar-accessory-housing