All Forum Posts by: Noah Lomax

Hey Chicagoland BP-ers!

I'm currently working with a realtor to purchase a property that is completely distressed and will need significant rennovations inside (almost an entire gut; but not quite). Based on the property line, the existing structure is 10' over the setback line in the front. 

Before we purchase the property, I'd like to understand: when we pull permits for the rennovation, would we be required to demolish the front section to bring it into conformity on the setback line or does that typically get grandfathered in? None of our renovations would be changing exterior walls. The ony exterior change we are considering is potentially getting a permit to put a deck on the rear garage.

Thank you in advance for your help!

A very late update on this post! It was a massive headache to go through the permitting process as it was designed for things that weren't built. So the requirements for plans to be written as if they don't exist coupled with asking contractors, electricians, and plumbers to sign on and give their license number for a project that likely won't bring any business ended up in months of chasing and asking. That said, we have our application in finally. In the end, the cash flow is there without this unit being legalized. However, getting it legalized should be a huge benefit when we go to re-sell one day! I'll keep you posted.

I'm currently in escrow on my last remaining property in California with a plan to purchase here in Chicago. I've lived here for three years and currently have another rental property in the city. Given the high mortgage rates, it looks like most opportunities for cash flow are in neighborhoods that normally give people reservation and/or in rehab properties. 

We are looking at a property on the north side of Englewood, on a street where both it and the surrounding streets look to be in good shape. Houses surrounding the propery have appreciated steadily (and sharply) for the last 5 years. I know there are concerns (crime, tenant damage, etc) in the area, but I was wondering from folks that have first-hand experience managing in the area:

-Who has had success managing in these areas? 

-What has worked and what has not worked?

-If you use a property manager that you like, would you be willing to share?

Thank you in advance for your expertise!

Investment Info:

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

Purchase price: $1,100,000
Cash invested: $245,000

We found a multi-unit on the MLS (Legal 3; non-conforming basement). The property had a lot of deferred maintenance, but beautiful bones and solid tenants. With the leases all up for renewal within 3 months of closing, we presented each tenant with an option of staying while we made upgrades to their unit with a minimal increase to their rent when the work was finished. In our first year, we saw a 24% CoC return on investment, minus the investment to unit improvements.

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

I was looking to re-invest money we made on a flip into a strong cash flow property.

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

I found this on the private MLS. We used the rising mortgage rates and changing Covid landscape to negotiate with a seller who didn't want to go on the open market.

How did you finance this deal?

Investment Loan

How did you add value to the deal?

Applied to get the basement unit legalized; added laundry to all units.

What was the outcome?

Generating great CoC in the first year with the second year projected to deliver 29%.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nick Libert at Exit Strategy, Aaron Schaler then at Nexus Mortgage. Both are PHENOMENAL!

Hi Folks,

Sorry for going silent. I was a little overwhelmed with a few personal items for a minute there (all good things!).

@Tom Shallcross Thank you for the information. That's exactly how I understood the process. It appears that electric, HVAC, construction, and plumbing all look good so far. We do have 5 electic boxes. The water service line is good question. I'll have that looked at. I will reach out to Samuel on the topic. Thank you!

@Jonathan Klemm you are always so helpful! I actually had read your blog article previously. As I understand it, for existing work the city requires a rough inspection where they will cut open a section of the wall. If that's done to code, they will assume it all is. If that's not, they will assume it all is not. So... there's a gamble here for sure. For this reason I was able to talk the seller into a $10k escrow for us to use for part of the process. 

@Bob Floss II Unfortunately the work was done before this seller purchased it. It was legal four when he bought it based on the paperwork we saw. The permit was revoked at some period under his ownership.

Thanks for the kind words, @William Costello and @Eudith Vacio ! I'm trying hard to change those stars!

Noah

@Eudith Vacioundefined

Hi Folks,

Just days before closing on a multi-unit in west Wicker Park we learned the city had revoked the permit for the garden unit of our building. After sorting out that headache, we went through with purchasing the property as a 3-unit with a non-conforming garden unit. The building is in the ADU zone, so now we are beginning that process.

It does look like everything in the unit was done to code, so I expect minimal work would be needed. But it looks like the city still requires me to work with GC and architect to apply for the permit. I have a great GC who is willing to go through the process, but it's new for both of us. Does anyone have experience applying for a permit to legalize an already-existing unit under Chicago's new ordinance? The seller agreed to an escrow account to get the re-permitting completed but I have a time window in which I must use it. 

Hey! Thank you all! This is already super helpful.

@Paul De Luca, thank you for these resources.

@eudith 

@Eudith Vacio it's on the west side of Bucktown, off North and Western.

@Morgan Scott Thanks! I didn't even know that was a thing. I'll look into this!

@Tom O.Thank you! I'm not afraid of a little homework, and I'm a pretty dedicated student so I think I can get up to speed quickly. I've had to do this for other markets, but I know each one is different. I appreciate you sharing about the Fair Notice Ordinance. That I had not seen yet, and is especially relevant with leases ending within two months of me taking keys. Thank you also for the info on the Criminal screening and the attorney referral. It looks like there's a landlord training on that as well. I guess the next few weeks will be a whirlwind, but that's part of this business. 

Thank you all for being awesome members of this community. I'm very thankful for BP! 

Hi Folks,

I am about to close on my first multi-family in the Chicagoland area. I've managed a SFH for a while, but it's in San Diego where I'm more familiar with the laws. Because I need to invest in some cosmetic improvements, I want to avoid paying for management for the first year or two to offset the costs and keep my cashflow numbers solid. All four units are currently rented, with two leases ending a month after we close. I know at a minimum I'd like to raise the rents to fair market value (which for one is a significant jump from their current lease), and ideally both of them would move out so I can make improvements.

I know Chicago is much more tenant friendly, and has a lot of restrictions. Does anyone have any tips on how to get up to speed on the local laws or have any good resources they can share? I'd be very grateful! 

Investment Info:

Condo fix & flip investment.

Purchase price: $236,000
Cash invested: $80,000
Sale price: $495,000

We found a 1bd/2ba condo with 1,400 sf private terrace in Chicago's Gold Coast neighborhood that went into foreclosure. I had been in touch with the listing agent prior to it going live, and we pounced them moment it was on market. We did a full gut, redoing both bathrooms, the kitchen, and adding a bedroom. Working with supply chain issues and inventory shortages was a headache, but we had a good team and prepared for each challenge.

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

We actually started the project as a buy & hold, but learned only just before closing that the HOA didn't allow for renting in the first year. It was a quite a shock, but we were able to pivot quickly and do really well.

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

I found the property on Fanny Mae's app.

How did you finance this deal?

Remaining funds in a 1031 Exchange

How did you add value to the deal?

Full-gut rehab

What was the outcome?

We had the property fully rehabbed and on-market with in 58 days of closing. It was a crazy amount of work, but a great experience! We priced low, had multiple competing offers, and sold above asking.

Lessons learned? Challenges?

HOA's are a real headache, even if you are following every rule to a t. We had a neighbor that was very difficult throughout the process. In hindsight, I wish I had engaged them before we started and built a relationship. I'm not sure it would have mattered, but it would have been great to know.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nick Libert with Exit Strategy is phenomenal. He worked his *** off to close this deal. I worked with the incomparable Jason Montoya, using a Fix & Flip loan from Finance of America. My builders were RJ Delejon with EJC Partners and Kenny Arnao with Arnao Development. I could not say enough good things about these guys!

Investment Info:

Condo fix & flip investment.

Purchase price: $236,000
Cash invested: $80,000
Sale price: $495,000

We found a 1bd/2ba condo with 1,400 sf private terrace in Chicago's Gold Coast neighborhood that went into foreclosure. I had been in touch with the listing agent prior to it going live, and we pounced them moment it was on market. We did a full gut, redoing both bathrooms, the kitchen, and adding a bedroom. Working with supply chain issues and inventory shortages was a headache, but we had a good team and prepared for each challenge. We priced low, had multiple competing offers, and sold above asking.

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

We actually started the project as a buy & hold, but learned only just before closing that the HOA didn't allow for renting in the first year. It was a quite a shock, but we were able to pivot quickly and do really well.

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

I found the property on Fanny Mae's app.

How did you finance this deal?

Remaining funds in a 1031 Exchange

How did you add value to the deal?

Full-gut rehab

What was the outcome?

We had the property fully rehabbed and on-market with in 58 days of closing. It was a crazy amount of work, but a great experience!

Lessons learned? Challenges?

HOA's are a real headache, even if you are following every rule to a t. We had a neighbor that was very difficult throughout the process. In hindsight, I wish I had engaged them before we started and built a relationship. I'm not sure it would have mattered, but it would have been great to know.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nick Libert with Exit Strategy is phenomenal. He worked his *** off to close this deal. I worked with the incomparable Jason Montoya, using a Fix & Flip loan from Finance of America. My builders were RJ Delejon with EJC Partners and Kenny Arnao with Arnao Development. I could not say enough good things about these guys!