All Forum Posts by: Michael Wnek

Yes if you buy at the right price. If you are buying a fixer upper you should have a basic knowledge of construction estimating. 

You should be able to define a lear and Inclusive Scope of Work. Meet with Several GC's/ Walk the job with them and compare quotes. 

60k is irrelevant as it will depend on the contractor. Do you know a GC in the area or are they remodelers? Can you spot the different? I got quotes ranging from $100,000 to $26,000 for a 3BD 1BA gut rehab. Same scope of work 3 different contractors. 

People make money on Flips not because they are DIYing they are making money because they are familiar with what is selling in that market and they know people who can build it for them. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chicago.

Purchase price: $530,000
Cash invested: $40,000

2 Flat with Coach house. Property is located on a double lot, 50'x126'.
Unit 1 (3bd,2Ba) is a raised 1st floor with large finished basement. Owner Occupied, live in gut rehab.
Unit 2 (4D,2Ba) is second floor with finished attic. Minor cosmetic rehab
Coach house (3bd, 1 ba) is a full gut plus addition 1/2 bath and build out of Garage W/D Space.
Detached 2 door separated garage - rented out to 3rd party.

Cashflow numbers are projected after we move out

What made you interested in investing in this type of deal?

This is our first real estate purchase and investment. We knew that we were interested in multi unit properties from the aspect of generating additional cash flow. My work experience is in construction and we were excited to take on a larger rehab project and were not scared of some of the "Issues" with the building that scared away other investors.

How did you find this deal and how did you negotiate it?

We found the deal through a real estate agent we were working with. She had the deal fall through with another client and reached out to us to see if we would be interested. The seller was firm on price but we were able to negotiate credits for work that needed to get done. We ended up with a check for a couple hundred dollars paid to us at the closing table.

How did you finance this deal?

We financed this deal through FHA first time homebuyer program.

What was the outcome?

Most of the credits that we negotiated did get used for the CapEx projects that were needed. The largest being a new roof on the coach house. During our first month we had heavy rains and water intrusion into the basement, not alot but visible amounts under the tile. We were quoted full drain tile systems of the basement between $9,000 to $15,000. After tearing out the drywall and monitoring the crack were able to diagnose and remedy for a lot cheaper.

Lessons learned? Challenges?

The biggest challenge is inheriting tenants. The leases that we took over were well below market rate for our area. When we renewed the leases at close to but still below market rate, there was backlash and some hostility. We choose to renew the tenants because it helped ease the cost of our rehab. In retrospect we could have floated financing for a couple months without tenants and rehab costs. in the future we would have offered MTM or shorter lease terms for existing tenants.

I was wondering how people have dealt with tenants who chronically pay rent late. Our current situation is a House hack in Chicago were we have two tenants. We took over the property in May and decided to let the current tenants stay, renewed with new leases during the summer which included raised rents. Prior to the new leases we received rent on time. After the rent raise we have yet to see payment on the first of the month. 

I know that Chicago allows for a 5 day grace period before any fines can be handed out or eviction can be started and so far we have always received payment before the grace period ends. 

We plan on not renewing the leases so we can complete rehab work but thats not until next year. In the interim i am curious how other Chicago land lords have handled situations like this. 

Were you able to find any more information about starting your property management company? Im in the same boat as you Art

This is perfect. Thank you taking the time to respond!

My Wife and I are looking to move into our first House Hack soon. I have a general question as when is the best time to start an LLC. We will also be managing a family property and looking to grow our portoflio over the next decade.

Curious as to peoples thoughts on when the right time to set something up will be.

Also interested in how an LLC can shelter us from taxes in other investments.

Thank you

My Wife and I are going to be moving into a house hack and want to Air BnB the unit that we currently live in. To frame every thing we currently manage the property for my father that the Air Bnb will be in. Its a Duplex in Chicago, the first floor is rented commercial space. There is separate entrances between the residential and the commercial space. 

Is there anything that needs to be changed with the insurance?

I am curious to know what are some things to watch out for and what are some good tips to make sure everything runs smooth. Any advice is welcome. 

I'm interested in hearing what Savings strategies you have used to save up for down payments for new properties. 

Same question for where to park positive cash flow? Savings Account? CDs? reinvest in other markets? 

Right now my wife and I have enough set aside in our savings to make our down payment on our first property. I am curious to see if anyone has used other forms of Saving/ Reinvesting while in-between purchases to super charge returns.  

Is it possible to take funds from an existing 401k and move them to a self directed IRA?

I would like to be able to use some money from my 401k to bolster what we have saved a down payment. 

Would a transfer incorporate a penalty or fee for transfer? Would a transfer count as a withdrawal? 

Right now its about 90% Pre tax Dollars and 10% Roth if that makes a difference.