All Forum Posts by: Marcin Talaga

Hi Mike, 

Sounds like you've got all the bases covered; good for you. The only 3 thoughts that I would throw in are 1. Like the others have said below, the rehab sounds a little light for the work you mention so just make sure you shore up those numbers during your attorney/review period. 2. For resale as a flip your numbers don't seem to account for sale side closing costs. Keep in mind if you sell with a Realtor you'll pay around 8% in closing costs on the sale (5% commission, 3% other C/C's +/-) If you think you'll be able to re-sell by owner then factor that 3% but if ARV is $130k the numbers get a bit tight. 3. You say "unit" first and then "house." Is it a house or a condo with a basement? Is there an association? If so, make sure you can legally add a 3rd bedroom to the basement. One of my clients wanted to buy a condo with basement and after reviewing the condo docs it turned out the association prohibited below grade bedrooms so you definitely want to verify.

@Amir K. Simplify your life.  Don't take a security deposit.  Charge a non refundable move in fee instead!!!  I usually charge between $400 and $500 for a non refundable move in fee and then you don't have to worry about all the rules that come with holding a security deposit.  The truth is that when that tenant moves out, there is a great possibility that the unit will need some refreshing but you'll mostly likely have to give the whole deposit back anyway.  By charging a move-in fee you already will have the money up front to paint and clean the unit for the next tenant. 

@Tyler D. I think you've gotten quite a bit of good answers here on this thread with the consensus being that yes, Chicago can be a great place to invest.  I'll only add this to the equation;  Over the last few years i've had a shooting or two and random violence happen around a few properties I own, and I've had no tenant turnover at those properties.  Violence happens all over this city just like every city in the US, and Chicagoans know that.  Any neighborhood you buy in that is even considered "safe" will have instances of crime.  That doesn't mean people will all together stop living there and you'll be stuck twirling your thumbs with no tenants to rent to.  

Most important is to work with an agent that knows the areas that interest you the most so that he or she can guide you in making sure you are buying the right place in the right place.  

@Ross Carlson, I have a great Northern Illinois/Southern Wisconsin Realtor that I've referred business to in the past.  I'll message you her info.  

@Daniel Botvynko If I were in your shoes, (and I was in a similar situation years ago so I can draw on personal experience), I would go work for a year with your brother.  Get on his payroll, learn the renovation side of properties, save up some more money, and then buy your first property with a conventional 5% down loan.  The mistake I made years and years ago was quitting my job to pursue Real Estate, when I should have pursued Real Estate while I still had my good paying job.  When I wanted to buy my first flip I had the downpayment, and I had all the knowledge, but I quit my salary job and became self employed so I couldn't get a loan from a bank (enter facepalm emoji.)  I ended up taking a 16% hard money loan from private lender and made it work eventually, but looking back I could have done it better.  The best way to start investing in Real Estate is to have a regular job that pays the bills while starting your investing career as a side hustle.  Then when things are rolling, you can quit the day job and make the side hustle your full time.  You can buy your first property with as little as 3.5% down fha, or 5% conventional, but if you don't have a job and you don't have tax returns you won't be able to.  You are young.  Start slow and build up from there.  If you can work construction and learn that side of the business in the mean time, it'll only help you even more down the road when you start to accumulate properties.  

Wow, very detailed post LOL.  I don't know if the following answers will help your or not, but hear are my thoughts from my experience:

1.  Typically Multi-unit properties cash flow better and are the better long term plays but not always. If I were you I'd keep my options and mind open to buying either or.  It sounds like you plan on owner occupying the first property you buy which means you'll be able to get away with putting only 5% down as an owner occupant.  If I were in your shoes, I'd look to first buy a 2/3/or 4 flat since they are usually more expensive and take advantage of getting a conventional 5% down loan.  Then on the 2nd property, scrape up the 20% needed and look for both cash flowing multi-units or SF. 

2.  Not sure what you mean by calculations but for me, one of the most important items I look at are the taxes.  Look for how much the taxes on the property cost in relation to the income coming in.  Other than that, you'll want to account for water, trash, insurance, common gas, common electric, cleaning and routine maintenance, landscaping, snow shoveling, and of course, like with buying any kind of property, plan ahead for future expenditures.  Roof, windows, boiler, interior renos, etc. and adjust your offer accordingly.  

3.  Always assume your expenses will go up every year so make sure the current rents aren't maxed out.  You don't want to pay top dollar for a building with maxed out rents that just meets your criteria only to have that quickly disappear in a few years with all cost increases and no room for rent increase.  ( This is where I always say team up with an agent that will help you identify the money making properties vs the money pit ones!)

4. Try and buy that next one with 5% down and run the numbers at 5%. Remember to account for PMI though with 5% down!!

5.  If you decide to go 20% down on a SF instead, you'll probably have to go 20% down on the next one too unless you can convince the bank somehow the 2nd property will be the new owner occupied one.  I heard this is hard to do especially if you buy SF first and then try to buy a MU to "owner occupy."  

I don't know if this helps or not but I'll leave you with this.  I own/buy MU's and SF's and both have been great as long as the numbers make sense so you can't go wrong with either or.  I will say, bigger buildings with more units are definitely more convenient but both are still good.

Marcin

   
   

@Jorge Leon keep your mind open to all investment types and options.  There is nothing wrong with diversifying and owning a little bit of each.  If you find a deal that you like, the numbers make sense, and the area is primed for long term stability or even better, improvement, then go for it!  Right now there are renters out there looking for every kind of rental.  I say spread it out.  Having a few places in the city and a few in the suburbs and a mix of multi unit and SF is a great option.  Most importantly, have a good team in place to help you identify solid deals.  If you'd like some help, feel free to reach out.

Now, for all you Illinois bashers out there... it's getting pretty old.  If you don't like investing in Illinois then why are responding to a message about investing in Illinois?  Why do you feel the need to lecture someone and bad mouth a city, or state?  The question wasn't asking IF he should invest in Illinois, it was regarding the types of properties.  Leave your rants out of it.  AIN'T NOBODY GOT TIME FOR THAT!  

I suggest the NW side of the city, in neighborhoods like Dunning, Portage Park, Norwood Park, Jefferson Park, etc.  Usually you'll find good long term rentals in these areas.  I'd be happy to discuss in depth.  

Hi Vicky, I am an active investor in Chicago and a Realtor who works with investors.  I'd be happy to help.

Marcin

Cody, sounds like you are in a similar situation that I was in.  My mom was living in a condo in des plaines and paying high taxes and high assessment for nothing in return.  I'm not sure exactly what advice you are looking for but my story might help you a bit.  I bought a 3 flat in Chicago, renovated it, and transferred it into her name.  She moved in one of the units, we sold the condo, and now in her retired years 1 unit pays all her bills, and the 2nd unit gives her an additional $1000 per month income!  She has a yard where she can garden, a 2 car garage, access to public transportation for when she stops driving, and is living for free plus has income from it coming in!!!!  It's the best decision we've ever made.  If you have any particular questions regarding multi units, or Real Estate, feel free to reach out.