All Forum Posts by: Jeff Borrelli

Hey Brad,

I appreciate your detailed response.  Here are my answers:

Our plan in more detail:

We plan to open two LLCs, One for the real estate and one for the restaurant.  We expect to put $100k into the restaurant space which will be part of the real estate side and I did include that $100 in my BP Analysis.

We then plan to put another $300k into it but that would come from the restaurant LLC if you will. My partners who run some restaurants feel the "build out" would come from the restaurant which is common in the industry. We expect this to take 4-6 months. Of course it could go longer but we know some contractors pretty well so..we'll see.

I forgot to include it in my post but I did calculate out carrying costs which would be around $8800/month for all expenses, ($5200 of that covered by apartments), which leaves us with $3600/month or $21,600 for the first 6 months.

We also met with a smaller bank who would give us 75% LTV, it would be a 20 year loan and interest rate could change every 3 or 5 years...I forget which, but they are willing to do this based on my and my partners experience/assets. I did run the analysis awhile ago so it shows an interest rate of 4.8% which will probably be up to 5.5% now, but shouldn't change numbers a lot.

In regards to the apartment rent raise, the market will support the rate change. This building is in the heart of the downtown. Also, we have a plan for converting them to short term rentals. I own a STR 1 block away which Nets $2k a month for the past 2 years with 88% booking rate and often people reach out trying to book weekends and weeks that are not available so I know the area can support more, plus we have a big wedding hall 1 block away so we plan to capitalize on that. (I have a 2nd STR on the same street 1 town over which also has more interest than availability). There is a 5% tax to the city for operating a short term rental and I do realize that the city could change their mind and not allow them at any point but worst case scenario we could raise rents slightly still with LTR. There is also an "office" on the second floor we would not need so at some point we would turn that into a bedroom to one of the adjacent apartments which will increase rent.

You are right about the property taxes. I think I added $2k to the current ones but they will definitely go up but I don't expect a significant raise, (maybe that is something I can check with the city based on my expected ARV).

In regards to the insurance, I did ask my State Farm agent for a quote and gave him all of the details and that's what he came back with.  I also tried to be very conservative on all of my building expenses including an $1800/month management fee which we would be paying ourselves/go into cash flow at least for the foreseeable future.

If the restaurant fails, we would at least have the build out done for 1/2 restaurants and could rent the spaces.  We also plan some activities for additional rental income because our restaurant would be a brunch/lunch place and then we could rent it out in evenings/weekends for groups/events and or rent out the kitchen as that's something that is also of need in the area.  (These hopeful additional rental opportunities are Not part of my analysis at all).

Hope that helps.  Let me know anything else I can answer. Thanks!

View report

*This link comes directly from our calculators, based on information input by the member who posted.

I am in a negotiation to acquire a mixed use building in the suburbs of Chicago.
This is my first mixed use building, I own 3 2-flats and used to own a
single family I rented out but now am living in myself.

The
property I am trying to acquire has 2 restaurant spaces on the first
floor, (only 1 kitchen), and 4 apartments on the second floor, (1-2bed
and 3 1-bed). The restaurant spaces were gutted for a particular
restaurant group who was going to build to their concept. They ran new
plumbing all around, HVAC, sprinkler work and did a lot of behind the
scenes stuff like fortifying the ceiling, moving a stair case etc. I
have partners in the deal who run restaurants so we would open 1 LLC for
the building and a separate for the restaurant space. However, the
restaurant spaces will need a few hundred thousand dollars to get them
finished and open.

The property is a very high traffic A+ area/historic building.

Here are the general specs. Negotiations are in the $1.2-1.3 million range;
conventional financing with 25% down and financing 75%. Right now,
apartments rent for a total of $5200/month and ultimately we expect to
raise those and with the performing restaurants, a total monthly income
of $17-18k gross. I ran it through the biggerpockets calculator and I
show that if we can get the total building rent to $18k, we would have
to put $300k down, probably another $100k to update it enough for the
restaurant to pick up part of the tab for their concept:

Does this sound like a terrible idea or a decent deal? IF we weren't going
to open one of the restaurant spaces ourselves, I would have a tough
time thinking this is a good deal but I'm open to any advice on
valuation, (I have no idea how to value the property. The building was
purchased 2 years ago for $1.1M, the group put probably $250k into it,
(which doesn't necessarily all benefit our concept), and now we're close
to closing and just want some verification on this deal or not.

Thanks!
Jeff

Thank you everyone!  I ended up speaking with a lender I am filling out forms for and they are looking at 25% down; 20 year AM but locked in...no refinance...straight 20 year loan; and 4-5% interest so that is right in there with what everyone said.  Thank you all!

Awesome. Thank you!  

Hey All, I'm looking for some ballpark number help. I am running numbers on my first commercial property. I own 7 rental units comprised of 4 rental properties but they are all residential. The commercial property I am looking at has a restaurant on the first floor and 4 apartments on the second floor. Purchase price of $1.5M.

1. How much will I need to put down? (30%?)
2. What sort of rate and terms are coming along with Commercial loans these days?
3. What % should I use for closing costs? or ballpark number.

Please let me know if you need any other information to help with this. TIA

Hi All,

I didn't see anything when I looked but I apologize if this has been addressed.  I currently have an Airbnb guest who booked for 28 days which here in Illinois is still a short term rental. He booked through Airbnb and although I prefer to keep him on platform, Airbnb will not let me do a new rental with him until January 31 when his current one expires.  The renter would like to stay from January 31-Feb 28 which again is fine on its own, but he can only modify his current stay and I'm afraid that if he extends, that will put him past being a short term renter and give him tenant rights which I do not want to do due to Eviction Moratoriums.  Does anybody have a short term rental agreement for Illinois (ideally), or another state I could copy to have him sign?  Any Advice on doing this the right way that I may not have thought of?

Thanks!

I have a rental in Chicago. It is a 3 flat condo building and I own and rent out the second floor. I lived there for 3 years before I rented it out. Our floors are not well noise insulated but I really do not want to put in carpets. The 1st floor neighbors are complaining constantly to my tenants for normal stuff including their 1.5 year old walking around. My tenants are moving out, they will live out their lease if they need to but cannot handle the neighbors.  These same neighbors used to complain about my wife and I in the same fashion constantly. My tenants want to move because of how passive aggressive and mean the downstairs neighbors have been, (the downstairs neighbors own their unit). Is there anything I can do since this will be an ongoing problem due to ****** downstairs neighbors?  I now own a couple rentals but I am still in my first year on all of them and self managing so far. Thanks!

Wow, firstly thank you to everyone as this is a lot of good help all around already!  I will update my mortgage figure.  I do plan to manage it myself for now as it is my only rental if I go for it.  I'm close enough in case there are issues.  It is definitely the wrong time of year so for sure if it would be a good idea to sign it through either June 1 or August 1 if possible.  (I was a renter for a long time, July 1 is not a good time if you like celebrating the holiday).

@nate  The house is on the east side of batavia....mostly residential but commercial has been building.  It's essentially Pine St. and Woodland Hills Rd.  It's close to the highway though.  2,000 or so sq ft, 2 floors, big yard.  Built in 1978ish.  Full unfinished basement, 2 car garage.  4 beds. 2.5 baths.  Updated interior (well, it will be as I'm planning to have all of that done).  Any other info that would help?

I am actually looking for multi family and not necessarily single family.  The house is nearby where I plan to move in a few years though (it's 45 min from where I live now but I know the area as I grew up there). But I also feel like I need to get started on something to get my feet wet.  I have a long time family friend who has a very active real estate business in that area, not investing, just regular real estate  and they do property management also so that is where I got the $2500 from.  I also looked at places for rent in the area which is a bad indication since they are still available but I don't know how to pull recently rented houses in the area either.  I'll ask him if he has access to that and I can update you.  I really don't feel confident in that number so I agree with you that I need to make sure that is a real number. 

i would get hit pretty hard on taxes if I sell. My w-2 income this year will be around $135k so I will end up paying quite a bit if we sell and I take the cash.  I was also thinking of realtor cost to sell plus closing costs etc. 

Hi, I have been looking for my first rental property in the city of Chicago. (I own my primary residence, condo in Chicago).  This is my first posting on bigger pockets but I have been listening to the podcasts.  I am still looking for another place to buy also but since this one i'm about to discuss sort of fell into my lap, I'm trying to decide if it makes financial sense.  I of course do have a sentimental attachment to the house but I'm trying to keep that out of it.  

My father recently passed away and I'm trying to decide if I should keep his house and rent it out or if it's just not worth it and I should sell.  The house will be in excellent condition, (we are fixing everything in the home inspection I ordered).  I will need to put approximately $20-25k into it for good rentable condition, (new rental worthy floors, paint, appliances, countertops, refinish cabinets, vanities, toilets).

I think the house will rent for $2500/month.  4 bed 2.5 bath

The numbers are as follows: Current condition appraised (once we fix the inspection items which we'll want to do whether we rent or sell it) at $250,000; $110,000 is owed on the mortgage.  I own half of the house and would need to buy out my sister costing me $70k of that difference, plus the $20k mentioned above to rehab. Therefore, I am looking to be at $200,000 to own the house myself and that is what I would mortgage.  I will technically have $70k into it but that is already in it so it's no additional cash from my pocket, that's just my half of the equity.  I estimate a mortgage of 4% for 30 years at $955/month; Taxes at $670/month; insurance at $100/month; grass/snow removal at $100/month.  This becomes $1825 in payments but there should be no surprises hopefully.  It will need a new roof in 5 years, but otherwise, plumbing is good, electric is good, water heater, furnace should be good, etc.  I know I still need to account for all of those items breaking eventually but I would like some thoughts from somebody with more experience than me if possible.  Any help would be appreciated!