All Forum Posts by: Henry Lazerow

In Chicago class A/B neighborhoods you can still get .8% rent to purchase ratios. Solid areas that appreciate and see annual rent increases with multiple applicants for each vacancy. Be careful of the cheap midwest areas. A lot of these are nightmares with crap tenants and old high cap/ex houses. 

I have worked with many California investors who bought in the A/B neighborhoods of Chicago. You can cashflow here on 4 units and if on the north side the tenants are so good you can even manage it remotely with a handyman. Our properties are a strong mix of appreciation, rent growth and cashflow positive in year 1.

Going on 6 years I have never had to even give any late notices, etc. for my northside chicago rentals, it's multiple applicants 700+ scores when list the units online. Compare that to my C class outside Chicago building where I deal with it almost monthly and got so stressed I ended up signing on a manager which has been a huge drag on the returns. 

Check your local laws. In IL we are allowed to discriminate in certain ways on small owner occupied buildings, it is a completely different set of laws to larger buildings. No idea what New York allows though as heard it is very pro-tenant. You may be fully in the clear though if your states laws exempt owner occupied buildings. 

FYI for other landlords. Never say you don't accept sec 8. Just let the applicant apply and use the same qualification criteria which they rarely will pass. 

In higher crime areas you can still find 1% but it comes with less actual rent collection/costlier issues. 

I bought my first 4 unit house hack in 2019 with this same 5% home possible loan its nothing new. It went away for a little but we always had 10 down programs that skipped self sufficiency test for clients. 

The biggest issue with self sufficiency test is conservative underwriting on rents or using current low rents. 90%+ of my clients raise the rents drastically in Chicago after purchase. Its not uncommon to see 2/1s in avondale on a 3 flat at $1100 each and you go in do cosmetic updates and bump each unit to $1900-2000. Especially now with rates where they are, pushing rents is only way to make numbers work. 

Was looking at a few deals in Waukegan. Looking at redfin history the prices have been going up rapidly 10-15%+ a year as well as rents up 50% from a few years ago. How is the tenant base from your experience owning rentals here? Do the tenants typically pay on time or are tenant problems common? 

Thank you, 

The issue with this is that most deals cap rates right now are below the interest rate so lots of deals have very skinny margins (if investing for cashflow) where a higher rate erases that skinny margin. I do agree experienced investors dont shop rates hard and care more about a lender that closes. I always use same lender and refer them out to clients.

I have done this its a great strategy if can find a deal where can cash out refi afterwards, hard part right now is finding deals that cashflow after a brrr its getting very rare. 

Brokered a client this 5br 2ba house in Portage Park neighborhood of Chicago but the cheaper less nice side of town for $350,000. He put about $40k in rehab and ended up renting monthly for $1500 master and $1000 each bedroom. The bedrooms all got rented first month on market and total now is $5500 a month. Normally 2/1 entire apartments in area go $1600-2100 ranges so these were surprisingly high for just bedrooms. We found there is a large demand for the flexibility of month to month rentals. Cool option for house hackers looking on north side of Chicago. 

Even the cheap "cashflow" areas right now don't cashflow after real cap/ex costs, maybe on an excel sheet they do. Areas are cheap because they are undesirable to invest/live there's no significant inefficiencies anymore. The deals I have seen work are larger 4 units $800k+ in class A/B+ areas mainly as those have less competition and atleast my market noth side chicago they still sell at decent real life cap rates. The 2 units and single families all negative.