All Forum Posts by: Phil Janasac

Still waiting on some movement from my EIDL application from April 5. I called a Tier 2 representative at the SBA yesterday and he could only tell me it was "in review". No credit check AFAIK. 

Can anyone else vouch if they are giving EIDL grants/loans to those with their properties filed as Schedule E? (Not in LLCs or business entities). 

Great to hear this! We applied for our Schedule E property on April 5 but have yet to hear anything. I heard that passive income entities (Schedule E) were not eligible but maybe that's only for PPP? 

The BP article here https://www.biggerpockets.com/blog/sba-disaster-loan-assistance-real-estate-investors states that "If your business earns income that is strictly passive, then no, you aren’t eligible." Hopefully that's not the case as our AirBnb income has been hit hard by this pandemic. 

I'd love to hear from others with a Schedule E property chime in to see if they were successful in getting the grant and/or loan from EIDL.  

My wife and I moved into our home in February of last year (2018). Existing owners at the time did not have a homeowners exemption on the property so we did not receive one on our first two tax installments (paying for 2017). The 2018 Homeowner exemption forms recently came out and I've read that first time applicants must have been occupants of the property as of January 1st of the tax year (2018). So does this mean we can't officially apply for HO exemption until January 2020? It seems unfair that we, as owner-occupants, should be paying the full non-exempted tax rate for 10 months of 2018 just because we didn't move in on January 1st. 

Is there a way to get those 10 months prorated for HO-exemption rate? Will the assessor office even check if I just try to submit it for this year? I have tried calling their office but the line is constantly busy. Any feedback would be greatly appreciated. Thank you!

@Alyssandria L.

We ended up passing on the home because of a home inspection that revealed not only a considerable amount of deferred maintenance, but also issues with the foundation, electrical that would've required major expenses that no longer made the numbers work for us. The big lesson learned from it all: If you're serious about buying a short sale, have it inspected before bank approval; even knowing that the bank might reject your offer and you'll be out $400-$700. It's better than waiting for 4 months like we did only to find out the property was horribly maintained. 

Now, regarding your question: Before we did the home inspection, we demanded that the seller's agent get the zoning certificate re-certified for a 3-unit building; as we had no doubt that it was built pre-1957 zoning ordinance. She presented her case to the zoning board and then they recognized the coach house as the third dwelling unit on the RS-3 zoning cert. I was a bit surprised at how easy she was able to accomplish this. I'm not sure if they used water records or building records to prove it was built/existing pre-1957. Is your property of interest being marketed as 3 unit? Only the zoning certificate will show how many legal units are recognized on your property of interest.

In your case, you may have difficulty getting any additional unit legally recognized, or even 2 units legally recognized, unless they were pre-existing to begin with and built before the zoning ordinance was put into effect in 1957. Adding additional units that were never there originally probably won't fly when it comes to getting them legally recognized by the zoning board.  I can't say it's impossible as I'm not professionally qualified to answer; it's just based on my understanding of the process. 

Note this section in the zoning ordinance: 

A pre-ordinance (built before July 8, 1957) residential building or building of mixed residential occupancy not complying with the requirements in force and applicable to the building at the time of its conversion may, if permitted by the Zoning Ordinance, be altered so as to legalize the present number of dwelling units provided such building complies with all the provisions of Chapter 13-196. For conversions which have added only one additional dwelling unit over the original number permitted, the provisions of Section 13-196-740 shall apply.

Other things to consider: 

1) Is the basement unit you plan to finish at least 7.5 feet high? If it isn't you'll never be able to get it legally recognized by building department even if zoning allowed for an additional unit. 

2) If you do successfully convert to a legal 5-unit property, if/when you eventually sell that property, you will disqualify your typical buyer pool that is approved for taking on residential mortgages as any property with 5 or more units is considered a commercial property. This will greatly reduce the pool of buyers as commercial loans are more strict and require higher down payments. 

3) If you choose to buy it as a 3-flat and choose add an illegal 4th unit, I suppose you could owner-occupy that unit it to reduce the risk of the city finding out. I have heard of many house-hackers that do this when they live in the illegal in-law unit in the basement and rent out the other legal units. 

I would make sure your investment works with the way the building is currently zoned versus how it would work with hypothetical units added to it. Good luck! 

Thanks for the feedback everyone! Really appreciated. It seems like it can be done. The ordinance says it checks "zoning compliance" during registration and whether or not it's in a restricted residential zone (which my property of interest is not in...for now) so I suppose there's always a risk of losing future eligibility. 

My wife and I are looking at purchasing a multi-unit in the Jefferson Park neighborhood of Chicago. We would owner-occupy and rent out other units. There’s a two-flat we’re currently interested in that has a finished one-bedroom basement with a private entrance, full bath, electricity & gas line to add kitchenette. There was clearly a kitchen there before it was renovated. We were contemplating the idea of adding back the kitchen and renting it out on AirBNB since it clearly isn’t eligible for long-term traditional rental as it’s not a legal unit; the ceilings are too low (77 inches high) and there’s only one exit (among a few other things).

Would AirBNB be a legitimate option for a unit like this? It seems like others are doing it but I wanted to get feedback about the risks. Since it’s not a legally recognized dwelling unit, would we have to list it as a “Private Room” instead of an “Entire Apartment”? We would want to contain the guests to the basement as the 1st floor would be occupied by tenants. 

Thank you! They originally did submit the zoning cert application showing 3 total units but zoning sent it back approved as two units; with some vague note about the water department only recognizing 1 building with 2 units back in 1954. Our attorney pushed the sellers' attorney to fix this, and they are looking into it now apparently. Everyone knows it was built pre-1957 but proving it will be interesting. 

What's funny is that the Harris Records on newschicago.org show 2 structural ids on the the lot (with the same pin). They get these records from the Department of Planning and Development (zoning!). 

Yes and no @Damian S. - The sellers were undoubtedly presented evidence that the rear structure was not recognized by the city when they were presented with the zoning cert when they bought the place a few years ago. This info may not have been relayed to their listing agent either intentionally, or because they conveniently forgot, or because they ignored it.  

We would have started our due diligence much earlier if we could've accessed the zoning cert earlier. The sellers' attorneys sat on it for 6 weeks and instead of showing it to us as soon as they got it, they waited until we had bank approval and were ready to close the deal, giving us barely enough time to digest the ramifications of all this. I find this practice incredibly suspect. 

Hey @Jerry N. - our lawyer said that we would have trouble selling the property if the city does not recognize three legal dwelling units. He also said someone needs to put in a FOIA request and obtain city permits to see if they have two buildings listed and three dwellings listed on prior records. Normally the sellers side would do this but this is a short sale being sold "as-is" - we are going to ask the bank to do it even though they will almost certainly refuse. I might go to UIC library myself and try to dig up the historical permits. Our realtor said that the property survey will definitively show two buildings on the lot which might help our case; but ultimately wouldn't prove that the CH wasn't built illegally. 

This has not affected our ability to finance the property via conventional 30yr fixed mortgage because we would buy it as a 2-unit multifamily instead of a 3. The appraiser wants us to cap the gas line in the coach house to show it's not a livable dwelling in photographs. We would not do short-term rentals. 

I thought the city could only force you to demolish a building if it was condemned? I'm obviously not looking at this situation through rose tinted glasses but that seems very unlikely. 

Thanks @Corey D. McCray and @Jeff Burdick - The main property was supposedly built in 1887 and the coach house looks almost identical, just not as deep. I'm positive it was built around the same time, if not before the main structure, as coachhouses often served as a temporary structure while the main one was built. We will follow up with our attorney about this but I have a feeling he won't care seeing as how it won't affect the sale regardless.