All Forum Posts by: Kumar Paj

I am also trying (and learning) to dive into multifamily space and it seems that Proforma presented by the seller/listing agent is very misleading most of the time. They paint very rosy picture and you have to ask so many questions (most important question, I guess is the expense they are referring is 'actual' or 'estimated'.  Most of the time it will be 'estimated' or combination i.e. INCORRECT), and do enough research. We were about to make an offer for one of the multifamily in Glendale Heights and when asked for original receipts, bills and other documents, the seller was very selective with regard to what to share and what not to share. Many of the numbers were misrepresented and we pulled of at the right time..

I would appreciate thoughts from experienced investors with regard to 

- What due diligence questions should be asked?

-  What specific documents/bills/receipts should be asked? 

- also, they show only one of the unit (the best unit they have in the building) so is it safe to assume and rely on listing agent about the condition of other units? 

Thanks!!!

@Radhika M.... I completely agree with you...the key advantage is to know the market and being local which makes it lot easier to handle such projects and eventually put it on auto pilot.  Though I haven't done any such projects remotely, I know people on BP who handles such projects remotely and they are successful in doing so.

Also, my intention was to give a real life example of positive cash flow property and of course you can throw many assumptions to bring your cash flow down as much as you want. 

- I am a Business Analyst by profession and very conservative with regard to numbers. I put low repairs since EVERYTHING is brand new (with two years of warranty) and on top of that I've Home Warranty (I pay $33 pm, and tenant is responsible for Service call fees)

- I think, I put 8% vacancy rate which is very reasonable. Also, these properties fall into the BEST schools neighborhood where demand for rental properties is very high. Assuming, low vacancy rate makes sense to me.  Also, I give $100 bonus/incentive to my tenant if they give me 90 days notice which helps me keep my vacancy rate down. 

- I've no reason to put Property Management fees since this is my own property and that doesn't apply to me. 

Guys...I don't mind agreeing with @Justin Ericsson. I don't have the perfect example of $150K properties rented for $2000 pm but I did two projects where acquisition cost is $89K and $95K (rehab cost of $15K and $5K respectively) and I am renting those for $1400 to 1450 pm.  And yes, these are in B+ class neighborhood (Napverville school district 204). Please check out details at----

https://www.biggerpockets.com/forums/223/topics/22...

- We are working on another project in the same area, this time a SFH (1600 sq.ft) for $127K+rehab cost $15K. Expected rent ~$1800 pm

- another one completed last Oct. (Glendale Heights, IL) - acquisition cost $60K. Rehab $2.5K (just painting) and rented for $1100 pm.

Not trying to brag but the point I am trying to make is that-- I learned that there are some good opportunities out there (of course not easy to find anymore, as it used to be)..

Property Tax is the most frustrating thing in Chicago and no clue how do they do that. Property tax for the above mentioned unit in Glendale Heights is $800 and the property tax in other VERY similar units within 2 miles are more than $2500.  Not only that, Property Tax are significantly different even across six units (SAME units) in the SAME building (I am not talking about 5% -10% difference here.. but much more than that). don't believe this..??? check this out

https://www.dupageco.org/PropertyInfo/PropertyLook... 

street number: 1330

direction: S

Street: Lorraine

checkout tax for all six units....and let us know what you think.....

@Brie Schmidt would you mind sharing those property analysis with me? If you have any multifamily in B class neighborhood, I will be interested.

Thanks

If this is your 1st deal, the perfect neighborhood will be within 2-5 miles from your own residence, if possible. This is because you know this neighborhood better than anyone else and it will be easy for you to manage. For your 1st deal, it is very important that it 'works' fine since this will build up your perception, confidence and overall experience towards REI (positive or negative) for the future deal. ......

good luck and happy investing... 

Sorry. I didn't read your note on registration...

got it.

****My thoughts are more applicable to Western suburbs; B- to B+ class neighborhood, and from Cash Flow perspective only****

With regard to SFH rental property, I am not sure if it is a good idea to go up to that price point. I always prefer to keep it under $150K since it makes more sense from CashFlow perspective. Also, if you get closer to $300K, you should expect fast turnover (your tenant will move out in couple of years) since most of the tenant who pays $2K-$3K rent, would more likely to consider purchasing their own house very soon.

To make it very simple, for $150K (3 BR 2BTH) you can expect rent around $1800 PM. However, if you buy a property for $300K, I am not sure if you will get $3600 ?? Would you? This will have significant effect on cash flow. I would rather buy two properties around $150K each. 

For me, the duplexes or townhouse style units with very low/no HOA works best for cash flow since they have lower tax and higher cash flow. Of course the strategy and thought process can be different if appreciation is your top priority.....

We are always looking for genuine wholesalers. 

I invest in Western suburbs so if you find something and wholesale it quick, please let me know. 

thanks,.