All Forum Posts by: Jordan Callaway

@Kristin Vanderkin-Jus $550 up front non refundable move in fee

@Wonderful Togbey actually yes! Due to the difficulty of operating here, Many investors would rather just not invest here, so on each deal there are fewer people to compete with when trying to buy. Also, as a result of the lack of investor interest, and headaches, and taxes in this market, prices are artificially suppressed (again, helps buyers). For example many properties in our market sell between $50 and $150 per square foot, where in other cities with similar populations may sell for $300-$1,000 per square foot but the rents aren’t necessarily 6 times higher! So cap rates can be higher in the Chicagoland area, but you still have an ability to find new tenants if someone moves out... this is different from other markets which sell between $50-150/SF where you have significantly lower populations, so there are limited new renters in some markets. Also I understand that in places like Georgia & Florida buyers may be competing against 40-50 other investors for a deal, where here, it may be 4-5!

@Vadim Lichtik

If your concern is time, suing for non performance could last 2+ years in arbitration then court... I agree with @John Warren best bet is to get it back on the market quickly. If their contingencies are removed than you get their earnest money. If their lender hasn’t ordered appraisal they can always have the lender deny the borrower’s application for anything, anyway, thus not satisfying contingency and they would get their earnest $ back. Other tricky thing is, earnest money needs to be agreed by both parties before its released to one party or the other. They may not agree to release it, especially if their contingencies are not yet fully waived/satisfied.

It is frustrating I’m sure, but the market seems to have woken up... you may get a better buyer anyway, the next time around (and the property is nicer now since you fixed those items!). If you have a hard money lender and your time is up, ask for an extension and explain the story to them. it’s nearly impossible to force someone to buy something if they don’t want to close, and if you sue them you will spend lots of money and even more time. “Throwing good money after bad money.” Also if you sue them and arbitration doesn’t go well and you have to go to court, you may not be able to sell to another buyer in that time frame as the property will be tied up in court, and they most likely won’t force them to buy it anyway. Wish you luck!

@Wonderful Togbey Wonderful, congrats and welcome to Chicago, the home of "The Professional Renter."

Tenants in Chi are notorious for using the law against their landlord to stay in their apartment without paying for any reason and can end up staying for sometimes up to a year without paying. If you evict in Chicago in NORMAL conditions it could be 6 months. With coronavirus, who knows how long it would take to evict. I agree with Bree and John above. If it were me, I'd go to a month-to-month with Bree's language, and take a move-in fee on new tenants. Last resort - if they stop paying you may have to implement, "Cash-for-keys" - an expedited way to get them to move out without waiting for cook county sheriff to arrive/courts to open 6-12 months - GIVE THEM MONEY for a moving truck. I know this is counter-intuitive, but its the only thing that worked in the last recession because the tenants are smart in Chi (again, last resort). Better to keep amenable if possible. 

It's possible the previous landlord took a non-refundable move-in fee instead of a security deposit, which could be why you don't have one. 

As for security deposits, in any other market I'd say that's fine. In Chicago, you have to pay interest on their security deposit and if you mess that up in any way, they can sue you, some have even gotten an entire year of rent in damages from their landlord by being off $0.02 (I wish this was just a joke). So as a result, most landlords have shifted to the non-refundable move-in fee. If they damage the apartment you would need to pursue them ANYWAY with a security deposit (if the damage is more than the deposit), so same goes here, you'd still need to pursue them. In fact, some of my clients with 1,000s of units only use move-in fees because they get to keep it and not return on move-out and it gives another line-item of income...

@Roderick McCleary Roddy! That would be a fair deal for bucktown if numbers are accurate and it's actually within the border of bucktown proper (many agents lie about this)... The major landmine here is the tax bill. Cook county is unique for this reason. For example, if the current fair market value (according to the cook county assessor's website) is $200,000 and you buy it at $400,000 and you're only factoring the old tax bill (check on cook county treasurer website), your tax bill could double (or triple because cook county), taking it from an 8% to a negative 8% return very quickly. Don't be discouraged though, this is an incredible way to get going. Good luck sir, holler if you need clarification on my note above! You should link up with @Jake Fugman if you haven't already (on agent side of things)

@Hector Estrada Hello Hector! in my opinion, you may want to try to find something in your same price range with slightly more units (6 unit buildings tend to sell for a premium thus are not very cash-flow positive). If you can find something 9-12 units may be worth considering. Especially with your background of experience, it's not that much more work for 9 units than 6. As for things to look out for... I agree with the sentiment above, CAP is important, but the main thing to consider in Illinois/Chicago is what is the current assessed value? This is very important and you must consider this prior to writing an offer in IL. For example in Cook county: if the county assessor's office says the assessed value is $40,000 (a fair market value in cook county X 10 = $400,000); if the property is listed for $800,000 and the assessor believes the fair market is $400,000 the taxes in theory could double upon a recorded sale. So if taxes in the offering memorandum say "$8,000" and then it sells, and the taxes go to $16,000 it means that on a 6-unit building you'd have to somehow recuperate that additional $8,000 (or on a 6 flat it would be $8,000/12 months/6 units = $111 increase in rent, just to pay for the new taxes to equal the return you thought you were getting before! Also, make sure you build in enough for janitor/maintenance/repair/cleaning/decorating/supplies/management (even if it's you now)/Misc./Reserves...

This is not even taking into consideration the new cook county assessor who claims he's going after real estate investors for more taxes. This is not to scare you, it's to prepare you! I'm sure you're already aware, but brokers aren't able to publish PRO FORMA taxes because they themselves don't even know what will happen. In other states, and other non-cook counties within IL, there are different formulas for projecting taxes (like some states are 1% or 2% of price, making it easy to predict).

Jordan 

@Eric Mayer

I’d wait until 1 yr but not a lawyer

Then when you get an offer or list you can start looking for properties but once the buyer’s earnest money goes hard (becomes non refundable) then start looking aggressively and MAKE SURE to setup intermediary third Party 1031 escrow prior to closing bc you can’t touch the money

Then once your property closes you have 45 days to identify property (after that you can’t change these) and then close on trade property within 6 months of other sale

Let me know if you have q

@Arthur Yu find a small multiunit like 4 flat

@Nik Lavoie

You can improve the other units and try to slightly bump rents (or at least being to market rate) while you live in another unit for a year, then refinance the property into a different lender and use fha again low dp, move out and into that building and do the same process again a few times if possible

Eventually you can put yourself in a position to refinance one or more properties and use the equity through cash out refinance to put 20 or 25% down on a larger multifamily deal and do same with the apartments as units turnover

Let me know if you have any q

@Farzan Setayesh in Chicago, first Step is look at city zoning website and see if specific property has zoning flexibility for storage. However, in Chicago it will require approval for conversions from:

-Alderman (next place to check. Go to local alderman office and ask if they’ll allow it - old Chicago way)

-Neighborhood groups

-City of Chicago Zoning & Planning / building & permits

-City Council

More common than 2 flat ( bc they’re trying to preserve those since tens of thousands Have disappeared into houses or condo) empty warehouses have been converted to storage like at corner of Ashland/Elston/Armitage and Ashland/Elston/Cortland