All Forum Posts by: Henry Lazerow

@Jeremy H. yes on the north side of Chicago which is where I own properties and work as a realtor the average 3/4 unit is worth 700-1.4 million so actually higher then your $850k mark. The north side appreciates fast, we have seen double digit appreciation/rent growth annually. The numbers you see in population graphs of Chicago include the dying south side neighborhoods, it’s a completely different market. To give a good example I have a clients 3 unit property contingent 1.55 million right now sell side we actually got $150k over on a 1.4 list and appraisal came in yesterday at 1.55 million, he bought it 1.15 million in 2021 and did only new porch/decks over that time. You can google the deals I sell if don’t believe, not going to waste my time responding to you anymore. 

Huh? Definitely not a guru, I invest myself and am a realtor with many repeat clients. What is there not to believe about real estate cash flowing? Few years ago every one talked about cash flow on here, now people just talking about appreciation. I only buy positive cash flow and so do my clients. It’s the only safe way to scale and cash flow is most definitely NOT a myth. That 4 I mentioned was bought 5 years ago. Of course you won’t make 25-35k net in year 1 or 2 but if you buy 3/4 unit buildings in a growing market you can after a few years. Rents go up and mortgage stays the same aka they cash flow more and more the longer you hold even with a mortgage. 

@Max Emory what you’re saying is absurd, you most definitely can cash flow on leveraged real estate. I have a 4 unit that has a mortgage and consistently nets me 25-35k after everything each year including reserves. I have tons of clients with 3/4 units that also hit similar returns consistently after the first year or two.

I will add having paid off properties even though cash flows more really does not make financial sense. Average cap rate for a quality growing market with decent tenants are 3-6% so that’s all your cash flow will be if no mortgage. Having a mortgage at 25 down gives you 4x any appreciation + 3-5% mortgage pay down off down payment amount each year which grows as loan amortizes over time + any positive cash flow. You end up with a total return roughly 3x the SP500 average. If you buy cash or hold with no mortgage you’re just getting similar return to SP500 with way way way more work. 

I have three multis. The big one is worth 850k in a class A/B north side Chicago neighborhood and it runs super smooth, never an issue and tenants all on auto pay. The tenants so good I even lease a new unit to end same day an old tenant leaves, they have 700 scores so no one does anything wrong. The others some headaches but got really cheap as rehabbed so holding good chunk of equity and they still cash flow averaged out but it’s way less stable some months far positive and some in red. Moving forward only buying class B+. 

@Mary Jay yes and that’s counting even big ticket item repairs averaged out so my monthly is actually higher. It’s kind of enough to live on (if lived really frugal) they all mortgaged. The 4 units cash flow best, I don’t think single families really cash flow much. Need a few units in same buildings and higher rents to cover expenses aka nice areas. 

Yeah I am a huge proponent of free markets and private property rights. The politicians don’t really care the negative outcomes and just want the votes. There’s more renters than landlords so it’s easy to pass these things. At least we don’t have rent control and it’s in the IL constitution that rent control is illegal otherwise Chicago would for sure have it by now. By the way @Greg Scott which state do you invest in? 

Properties cash flow heavily in year 5+ as rent growth compounds and your mortgage stays the same. You can get some cash flow year 1 but it’s very mild if you’re leveraged up. I have about $40,000 net a year after reserves and everything but have $500k+ of equity in them.

A big factor is also who you have do repairs. I have cheap guys who do it 1/2 to 1/3 what you pay if call someone off Yelp. This is essential to running these profitably. 
 

@Greg Scott your in MI right? “A new Michigan law bans many landlords from rejecting tenants based on source of income, like housing vouchers, veterans’ benefits or Social Security.

Gov. Gretchen Whitmer signed three Senate bills of a five-bill package Monday, Dec. 30, that prohibits landlords from discriminating based on source of income.”

Recently over 165 lawsuits were filed in Chicago against small landlords who declined Section 8 tenants. These are being issued by local "nonprofits" who are mass emailing landlords pretending to be section 8 tenants. If any prospective tenant emails you asking if accept section 8 you cannot say no. You can decline them off their credit, background and for not having 2 past positive references. I like going off references regardless of market or section 8 tenant, it really helps us avoid the trouble makers. North side Chicago I have never even had to give a tenant a late fee and none of the tenants I have placed for clients have ever given them issues either, properly picked people pay like clockwork on autopay. There is enough demand on the north side you should never have a tenant issue if you do the correct due diligence.

Secondly, lots of fake applicants lately. People are buying stolen identities off facebook groups and using that info to apply as someone who has good credit and making fake paystubs. One way we fight this is with photo verification pre-lease signing and not approving renters who don't view the place in person, our credit underwriting software also flags apps that have a high likelihood of fraud. We also dig into their paystubs on a deep level. @Mark Ainley sent out an email in regards to these fraudulent tenant apps recently and they also have some great strategies they use to prevent it.