All Forum Posts by: John Clark

"The 2 flat is metered so it changes slightly for each month based on tenant water usage. I should look at adding a second meter and hot water heater and move the water bill over to the tenants so I could save almost $1000 a year. "

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You'll have to branch your service line before the meters in order to do that, and alter the sources for your lays for the second apartment. Should not be too much of an expense, but count on a few thousand dollars, anyway.

Good school districts are always crucial, for both renting and for owners.

"There is a loophole that allows landlords to make tenants legally responsible (in their lease) for property taxes through the payment of their rent. And this qualifies the landlord for the homestead exemption. "

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No, it allows the TENANT to claim the exemption, not the landlord.

"@Josh Adams paying off the 2 cars would net me $1200 per month in extra cash flow. Paying the properties off, would get me another $1,000 per month. So I can free up about $26k in cash flow if I pay off the 2 rental properties and the 2 cars"

Joey -- "... if I take the $300k check and immediately buy equipment for my business instead of moving it into real estate, I can possibly avoid paying taxes on the $300k by taking bonus depreciation on the new equipment purchased."

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There's an old saying -- You change the facts, I change the answer. What is your return on investment (after bonus depreciation, etc.) if you buy the equipment for your remaining businesses? And remember, I assume you'll earn more money in the businesses with the new equipment.

Also, what are you paying in taxes on that $40K? The $1200 per month for the cars is tax free, assuming you're not running them through the business and writing them off as a business expense. Paying off the properties and increasing that cash flow -- is that after increased taxes from reduced deductions?

Figure out your true returns and let the little woman decide.

@Joey Allison

"I will probably walk away with $225-250k. I have not spoken with my CPA to know exactlt what my tax consequence will be. "

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First things first. You've been all through this thread asking about what you do with $300k. Wrong. That's a pipe dream. You have to plan on what to do with $225k, NOT $300k. Since your goal is to replace W-2 income with investment income, that makes a huge difference. You need much higher leverage for a $225k investment to replace $40k in income than you do for a $300k investment.

Second, the cars have no equity. Pay off the cars. I agree that maybe you should sell the cars, that's up to you and the little woman. That puts you down to $165k in dry powder, and gives you cash flow on your earnings. Sit down with your better half and figure out risk tolerances, etc. and career alternatives. She gets a big vote.

Third, all your planning has to be based on $225k. not $300k. Your presumptions have been wrong from the jump.

"I will be selling my ownership in one of my companies for $300k. . . . I’m trying to see how you would invest the $300k."

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I doubt you have $300,000. What's your tax hit on that 300k?

The northwest side of Chicago is an appreciation play, not a cash flow play, so the first thing you want to ask yourself is which makes sense for you financially. Given that you want to live in the house, I assume that you look more for appreciation and long term holding than cash flow on immediate rental.

Keep in mind that the new mayor has made noises about rent control (e.g., allowing people to "age in place" and considering stopping water shut offs as "inhumane" (not that she could do it, because there are bonds issued against water receipts, but the mere fact that she is considering it speaks volumes as to her financial literacy, her willingness to cater to the interest du jour, etc.)), and "multi-unit" covers a multitude of sins - duplex, three-flat, six-flat, etc.. So you may want to consider that appreciation won't necessarily be what it was. I had high hopes for Mayor Lightfoot, but I fear the poverty pimps have taken over City Hall.

Look for niche neighborhoods and niche renters, and remember; transportation costs and housing costs are one and the same. For example, if you live near the Blue Line or the Orange Line, apartments or even bedrooms can be rented out to airline pilots and stewardesses. Why? Those lines connect to the airports and you can market accordingly.

Don't forget the South side. Southwest Chicago housing stock and businesses is almost a doppleganger of northwest side areas, but cheaper due to higher minority (usually latino) presence and general North side snobbery. Find areas with convenient mass transit to downtown or Midway (if airport is your market) and you can get some cash flow (not great, but some) and some appreciation.

Just ideas, feel free to ignore, but until you tell people what your druthers/tolerances are, not much advice people can give.

Oh -- NETWORK, NETWORK, NETWORK

"I'm not in the mood for spending time or money on an eviction."

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Get in the mood.

From what I understand, it won't affect zoning at all. Aldercritters will still have complete control over that, so be prepared to show your "support and appreciation" for your elected thief every time you want a zoning change. They won't be able to shake you down for permits, however, a la Burke.

Contact the City's department of buildings and ask if the property was ever inspected and cited for violations, and if the violations were ever cured to the City's satisfaction. The inspectors might even have a list of companies they know who get things fixed and fixed right the first time.