All Forum Posts by: Jennie Berger

Hello BP!

I have a growing community of friends / colleagues / et al who are interested in putting their money to work passively by private lending. I've been in the private lending space for about 1 year, and have lent on 3 projects to date. I have connected with many borrowers who are asking me to lend on their deals, and while many of these deals sound very attractive, I'm limited in my own source of funds, hence the reason for this post.

Background: I've been a designer and developer for the last 5.5 years, specializing in large gut renovations and ground up construction of single family homes and small multi unit buildings in the city of Chicago. I own and operate a few rentals, both mid term furnished and long term unfurnished, in 3 different states. I am an Illinois licensed real estate agent (mainly used for my own developments).

My Role in these private lending partnerships: Source and vet the borrowers, underwrite deals, originate, manage and service the loan, be a fiduciary. 

Context: Currently I lend in both my own LLC (just me, sole owner), and in a separate LLC (JV between one of my capital partners and me). This works well, but seeing as new people want to come on board, I don't believe creating a new LLC for each new capital partner makes sense, nor is it scalable.

To clarify: I am NOT looking to pool funds or syndicate at this time. Merely to lend more borrowers money on more of their rehab / flip deals, as well as offer transactional funding for same day double closes.  In essence - each new capital partner would lend only on one deal with me. I will NOT be mingling funds from multiple partners on the same deal.

Locations: Over the last year, I have lent only in Chicago IL, where I'm presently based. I'd like to start lending in other states - Texas, Florida, and maybe some others as well as Chicago.

Goal: Before presenting these lending opportunities to new capital partners, I'm hoping to glean more insight into the wisest, most efficient way to structure these partnerships to protect everyone involved. I've read/learned a little bit about: Partnership lending, table / wholesale funding, fractional notes, lending trusts, note on note. 

> Is one of these the best option? 

> What other options are there that are streamlined and will protect everyone involved?

> Which type of attorney I'd need to hire to draw up a legal document(s) for this type of partnership?

Thanks so much in advance for your wisdom and advice!

This sounds like an amazing project @Jonathan Klemm!

Super exciting opportunity @Quincy Mingo! I'm sure you'll get some really valuable input on your questions. *If you need a creative helping hand with the design for your renovation, please keep me in mind. :) 

Quote from @Brie Schmidt:

Quote from @Drew Sygit:

Politicians are getting too extreme!

 Yes, the problem in Chicago is we have so many mom and pop investors and no way to reach all of them except word of mouth.  This was passed in October and I would say at least 50% of investors, and agents, have no idea about it and the other 40% don't fully understand it

@Brie Schmidt I had ZERO idea about this, thank you for sharing.What a SHAM. Is there a template you use to contact our Alderman?

Agree with @Ivan Tello. 

A 3-unit in Wicker Park - when rehabbed nicely - can be worth a LOT of money. Have you underwritten the deal from the perspective of: 'If i fully rehab the property, in addition to repairing it structurally of course, how much can I sell it for?' 

Structural repairs are really unknowns, as others have mentioned in this thread. However your potential margins - with a brrrr/refi or a sale - are very large if the property is able to indeed be repaired.

Good luck and keep us posted on your progress!

One of our borrowers who successfully flips on the South Side (Dobson, Park Forest, etc.) is capitalizing on the abundance of discounted rehab properties (on market and off market via wholesalers and the such), which is a key strategy given rising rates. 

He prioritizes deals with substantial margins, mitigating rate increases, and actively manages rehab costs to maximize profitability by being heavily involved in the process and GCing his own projects. He possesses a deep understanding of his target neighborhoods, crucial for accurate valuations, and is adjusting to market shifts through meticulous financial analysis and timeline management. 

Critically, he's filling a gap: turn-key, entry-level homes are scarce in Chicago, creating a strong demand for his rehabbed properties. His disciplined approach demonstrates that opportunities persist for those who understand their market and control costs. This strategy is especially effective given the current lack of entry level homes in Chicago.

Our two cents - thanks for bringing this topic to the forums!

Quote from @Mario Morales:

I've been using the MLS, but I like the idea of talking to neighbors to see if they're interested in selling—or at least getting on their radar. After completing a massive gut rehab, I'm now looking for minimal value-add opportunities. If I can find a property that just needs cosmetic updates, covers its expenses, and leaves a little extra, I'm interested. I buy and hold.

After all the gut rehabs and new builds we did in the last 5 years, I felt the same way. Find me a simple cosmetic rehab that will take about 3 months and I'm happy! >:D Still wondering where those cosmetic rehabs are in the city, though...

Hey @Ryan Driver. Have you considered the following?

Partner with an Experienced Wholesaler: Consider partnering with a more experienced wholesaler in Chicago / vicinity who has a strong buyer network. They might be willing to take over the deal or help you find a buyer for a share of the assignment fee.

Wholesale to a Retail Buyer: If you can't find an investor-buyer, consider marketing the property to a retail buyer (someone who wants to live in it) on the MLS. If you're not licensed, engage the help of a local Realtor (I can help :). You'll may need to do some light repairs (unless it's truly turn key as you mention) and staging, but it could be a viable option.

I hope this helps! Wholesaling has a steep learning curve, but with persistence and the right strategies, you can succeed. Good luck!

@Sebastian Nadal Congratulations on your first purchase and how exciting that you want to start house hacking!

As someone who did something very similar to this for the last 2 years - rented out my 2nd private bedroom and bathroom in my apartment (rental) furnished to traveling professionals and medical students - I think it's a great idea! 

I'm in South Loop near the Loop, lake, Grant Park, CTA, and a variety of hospitals / schools, so renting out the room on a mid-term basis (32+ days) for a premium was the best strategy for me. Since you're so close to Loyola and not too far from Northwestern, I imagine you might have a pool of people who need temporary furnished housing while they study, do a medical rotation, or travel in the medical industry. Have you considered this option as well? 

The investment is a little bit more upfront since you'll have to furnish the room and bathroom fully, but you may be able to command a higher rent each month since you're covering all utilities, WIFI, and providing all the furnishings.

Either way, renting out the room is a great idea and I'm sure it will be helpful so you can rest a little bit easier while you save to move to Lakeview, eventually :)

Quote from @Nicolas Tow:

I recently purchased a 3,125 square foot empty lot in the 27th ward area of Humboldt Park Chicago and I was wondering how difficult it is to re zone from RS-3 to RS3.5 or RT 4. I was hoping to do a new construction Duplex. Is very difficult to re zone in that area? Appreciate any help.

 Did you ever rezone this? Inquiring minds want to know. :)