All Forum Posts by: Michael Mroczka

Thanks for all the help everyone! I ended up finding a great triplex in Holly Hills which is a gorgeous area. Under contract now! :)

@Jonathan Klemm my 4 unit is in Bridgeport. It's a great up-and-coming area. Two new starbucks nearby, awesome local restaurants, and the biggest crime threat is bike theft. Really great neighborhood. 

Quote from @Theresa Harris:

With an FHA and only 5% down, you are unlikely to find a place that will cash flow. There are other ways that rentals earn you money-tenant paying down your mortgage and appreciation though you can't count on the latter.

When buying, a home in a nice area is always a good investment; but usually you don't want to buy the nicest home in the nicest area-you want one of the worst homes in the best area.  Then fix it up so that is it not the worst house in the area.  That will also get you more when you do sell down the road.  Worst can mean different things-dated or fixer upper.

You'd probably pay more than $14K in rent to live there for a year, so I say go for it. Make sure you know the area you are buying in and good luck.

I feel like this misses the point of house hacking though. I thought you wanted to spend as little money yourself as possible and let your tenants pay for the asset. Sure, it makes sense to buy something that I can force appreciation with some renovations and if there is something that just needs cosmetic updates then I'm game for that, but if I buy something that needs a kitchen remodel or a bathroom overhaul then I'm spending 5-10k more than I would have if I had just rented. This makes sense if I can dramatically up the rental rates, but since rental rates are suppressed in St. Louis right now I didn't think it made sense to buy something that needed work put into it. Am I thinking about this wrong?

Why a lower price point? Isn't the whole benefit to moving out and having another person pay the mortgage that they pay for an asset? I'm assuming I'd want them to pay for the most expensive asset I can get and still have close to cash flowing. Am I thinking about that wrong somehow?

Quote from @Crystal Smith:

Quote from @Michael Fortier:

Hi All,

I've not only been a long time fan and consumer of BP, but I've had a goal of house hacking a 2-3 unit multifamily property for a couple years now to help facilitate not only an increase in savings from my W2 but also start a path to financial freedom for my significant other and I. Recently we've been talking almost daily about moving on from being renters and buying our first property together whether that be single family or a multifamily property. My better half hasn't always been completely on-board with a multifamily property, mostly due to terribly loud neighbors the last couple places we've rented and wanting a space for ourselves. With all that said, due to the high interest rates and increasing cost of single family homes no matter the area here in Chicago, I think we're both in agreement that a short term sacrifice is well worth the savings and wealth growth if we can find something that makes sense.

My question for the community, specifically investors here in the Chicago market, is are you seeing deals that still produce cash flow using FHA financing or are those deals few and far between right now? I should also add that because this would be a house hack, I'm looking for something in an area that would probably be considered less risky. I know a lot of this is very vague and there's several other factors that need to be considered here i.e. what we're capable of putting down, specific location, etc. but high level I'm trying to determine if it even makes sense in this market to pursue a 2-3 unit, because at the end of the day if it doesn't cash flow after I move out, I'm only getting further from our ultimate goal of financial freedom.

My thought is if the math doesn't make sense in the current conditions, it may be more beneficial for us to do something more geared towards a live and flip. I'm a project manager for a large GC in the area and could leverage that skill-set.

Our lease ends at the end of summer, so one way or another we're moving forward but any thoughts or advise would be really appreciated!

Thanks!

Here are my thoughts. There are opportunities in the 2-4 unit or the single family for the live and flip if you use the right strategy. And given your background as a project manager for a GC the right strategy is to get approved for an FHA 203K loan and target properties that require renovation. If you're patient you'll be able to find something that is discounted enough that even after completing the renovation it will cash flow because you did not purchase at market value and even after the renovation your mortgage note will hopefully be well below what it would have been if you purchased a turnkey property.

While looking for the perfect multifamily to fit the strategy above you should simultaneously look for a single family that fits the same criteria. 

I wanted to build on Crystal's excellent suggestion here. The best deals in Chicago for you are the same type of deal I did last year. FHA 203k loans. Specifically look for a building that has the ability to duplex UP into the attic or DOWN into the basement to extend the square footage. My wife and I bought a tiny 2800 sq ft four-plex for $400,000 but then expanded one of the units into the attic with the 203k loan's extra $150,000 and added an additional 1400 sq ft. That meant going from ~$4000 in rent to over $6500 in rent total (after moving out). Lots of duplex/triplexes/quads don't make sense when you run the numbers with the existing rents, but they can make sense if you convert one of the units into a spacious 3-4 bedroom unit that extends into the attic. I feel like this strategy is still really doable in Chicago and is super underutilized. You probably have to offer over asking price for the property to get the seller to agree to the weird loan type, but it's worth it since you literally don't pay for the construction (your tenants do since it's rolled into the mortgage). You don't have competition from most investors because they either a) don't realize the loan exists or b) are not doing FHA. You can even beat out all-cash offers since those are usually super low compared to your offer which will be really high. Lots of advantages here.

Hey friends!

Long time lurker, even though I post infrequently. My wife and I own a cashflowing quad-plex in Chicago that was a 3.5% FHA loan. We are in a fairly unique position because I work fully remote in a very secure/high-paying job and my wife is about to start her career as an Audiologist which also will be secure/high-paying. She has to do residency in St. Louis for a year and then residency again in some other state for another year. We are considering buying in the St. Louis market at the moment with a 3.5% down loan because it's just so cheap. Something that many people don't realize about FHA loans is that you actually can have more than one under a few special circumstances (https://fhalenders.com/fha-100...). One of those circumstances is moving for job related reasons more than 100 miles away from your current FHA loan. My wife and I will be doing this once a year for the next 2-3 years at least so there is potential to get an FHA loan with every move.

With that said, we've been looking in St. Louis for about a month for a house hack and there isn't really a ton of multi-family inventory so we were considering just buying a single family home and getting the nicest home in the nicest area we can (we have great credit/reserves so we can buy something really nice). We'd love to try long-distance mid-term renting it, since we are confident in our abilities to self-manage and build a team in the area. If we live in the house for a year, we can rent it out but as a long-term rental any house will almost certainly not cashflow since rent hasn't caught up to the rising price of homes in St. Louis. As a midterm rental, it can potentially cashflow. Here's the question.

Should we buy a place that does not work for LTR cashflow just because we can use an FHA loan and can comfortably afford the negative cashflow in our budget? I feel like it's a waste of a year to go there and rent when we can own a $400,000 house with just a $14,000 downpayment + 12 months rent + ~$150/month to offset the negative cashflow (if we have to LTR because MTR'ing doesn't work out). As a long term buy-and-hold, I feel like it's pretty hard not to win here even if we are negative for a while because rent rates will almost certainly rise over time.

What would you do if you were me? Thanks! :)

Hey friends! I'm a new landlord and have discovered bigger pockets and loving the community here!

I've done something that flies in the face of what most people think is wise – I've decided to list of my units as "allows large and small dogs." I know that many people say this is a bad idea, but it's a decision I've made at this point so I'm rolling with it.

Here's the question though: Assuming I've confirmed that a dog is not a service dog/emotional support dog/psychiatric dog/etc, is it within my rights to reject a tenant based on the dogs individual temperament?

I've been trying to find resources for landlords on this and I'm coming up with lots of places that help tenants and their dog questions, but nothing about landlording rules. I had a tenant that came by that brought their german shepherd (I asked to bring him so I could judge temperament) and they love the place and want to apply but their dog peed on the floor as soon as he came in and then got skittish and seemed like he might bite me. Am I allowed to reject this candidate based on the dog? There are other reasons to disqualify this particular tenant (doesn't meet minimum credit requirement for instance) but if they had matched what are my rights here? Can I reject a dogs on a case by case basis? Too loud, too mean, too destructive, etc?

I'd love some clarity on this or resources here - this seems like a silly thing to hire a lawyer for just to ask this type of question. Anyone know what the rules are here? I'm in Chicago if that makes a difference.

Thanks for the help in advance! :) 

-Mike

I'm thinking of either McKinley Park or Albany park too! Just curious to see if anyone else can speak to those areas a bit.