All Forum Posts by: Jake Fugman

@Nate Grabner Some great advice has been given so far in this thread. I would also point out that your financing method & down payment is going to play a big role in what area and property you can actually purchase. A lot of buyers like yourself have no issue getting pre-approved for the price range that would put them in the neighborhood they want, BUT they often dont have $100k in cash to apply towards down payment/closing cost. If you are planning to put under 15% down and utilize FHA financing you will want to become familiar with the loan limits and requirements.

Ex: A $600,000 3 flat it will likely be almost impossible to put under 20% down due to something called the self sufficiency test (SST) that comes with FHA. SST says that 75% of the gross monthly rent has to be greater than your monthly PITI + PMI.

This example is why a lot of buyers in your shoes end up in neighborhoods with 2-3 unit inventory closer to the $400-450k range.  Hermosa, Belmont Cragin, Portage Park are decent areas to find stock like this on the NW side. 

@Emily M.  I used the "CE Shop" recently for my renewal and it was a smooth process. 

Also, I recommend eXp Realty if you want a flexible and truly cloud based model.  

@Robert Andersen Im a big fan of this area, along with Garfield Ridge on the west side of airport. You get a neighborhood feel similar to nearby suburbs but much lower taxes. Demand in the area for multi family properties has pushed up prices in recent years so typically the deals that are showing even close to 10% CoC come with some rehab.

@Carol Small If you have ever worked with investors as clients the transition should be a bit easier VS transitioning from investor to Realtor. If you haven't yet represented investors on the buy side I would recommend seeking them out so you can practice underwriting deals and understanding ROI expectations in your local market. Then it will be a lot easier to apply the same practices to your personal investments. You will find that eventually your clients can/will become partners too! BP is a great way to meet newer investors that need a hands on approach.

@Raj Chris It sounds like a very stable purchase based on location and rough NOI. Being w/in the city limits of Chicago will save you A LOT on taxes VS being a short distance away in Elmwood Park or Norridge. Assuming the units are at least 2 bedroom / 1 bath, you likely will be able to raise rents up from the $1066/mo average over time. 2 bed/1ba units in the area should get about $1200-1300/mo with rental grade finishes.

Whether or not its a "wise" purchase is subjective to your personal investment goals.  As long as you have a source to build up more capital for the next purchase I would say you have chose a good way to get started.  A lot of newbie investors dont have the luxury of locking up $100,000 in equity on their first multi unit.  

Good luck!

@Jodi Taylor House hacking is an awesome way to get started. If you plan to put under 15% down you will likely need to go with FHA financing. Make sure you talk to a knowledgeable lender that can explain the requirements for FHA specific compliance. @Zack Karp has a lot of experience with FHA and is a good person to get on your team. 

@Jomar Edwin Benoit  Im a fan of the mapping function to browsing in the app/site called Homesnap that @Angela Dulin mentioned.  

If you want a more detailed CMA and/or an ROI analysis put together some investor friendly agents offer flat fee services - about $100-200 per property. This can be useful when looking at off market options or lower priced properties that agents may not see benefit from representing you on the buy side.

@Khizer Husain  The South shore has seen some improvement in recent years.  The nicest section is the Jackson Park Highlands near the golf course.  Once you get south of 75th certain blocks can be rough.  I recommend investors target the blocks with as many single family units as possible.  The blocks that are dominated by 6-8 unit buildings have lower upside IMO.   Most owners in this market expect and embrace section 8 voucher tenants. 

Cap rates on the decent blocks are in the 8-9% range for 5-10 units Ive seen.  You might get better in larger buildings. 

Rents are APPROX 1 beds = $600-700/mo 2 beds =  $750-950 3 beds = $1000-1100/mo

@Jason Givens There is definitely a sweet spot when it comes to finding 2-4 properties that "make sense" if you are using FHA financing. Cant be too expensive since they wont comply with loan limits or pass the self sufficiency test (3-4 units only), but cant be too cheap/distressed or they wont pass FHA inspection. If you want to live for free (or close to it) in a C class or better area you will likely have to be comfortable with living in a non-conforming unit. If you want to get into a legal 3 unit you likely need to find something just ugly enough to pass FHA inspection as "live-able" then plan to apply some cash to rehab. You can find some still in the $400-500k range in W. Humboldt, Hermosa, Belmont Craigan - just make sure your agent knows how to pitch your FHA financing to seller side so they don't de-prioritize you against conventional.

The turn key properties will be too expensive unless you are willing to live in a fringe neighborhood  on west side or SW side like East Garfield, Austin, Little Village, Woodlawn, etc. 

@Mike M. I'm a local investor and agent in Chicago. I joined eXp because of the freedoms it allowed investors, but I also sell pretty heavily. Id say if you ever EVENTUALLY wanted to sell more than 2-3 deals per year or join an investor friendly agent team eXp is the way to go. If you really only want access to the MLS its a coin flip since the higher monthly fees will balance out the 80/20 split that eXp has.