All Forum Posts by: Sean McKee

Hello fellow Chicagoland investors!

2021 has been quite the year for real estate. Competition has been fierce for residential property and deals are hard to come by. I'm sure a lot of us got more creative and worked a bit harder to find deals that work. As 2022 approaches, what markets within the Chicagoland area have caught your interest? Where do you see the most opportunity? Have you had to adjust your investment approach?

I know I have started to set my eyes on Northwest Indiana and have found myself considering areas in Chicago that weren't on my radar 5 years ago.

@Ryan Heywood- This is definitely a difficult decision to make. If rents have truly gone up that much for your market, I'd be hesitant to only do a 5 to 10% increase. If rents shoot up again, you'll find yourself even more under market value. I'd probably go with what your property manager suggested. If not you could find yourself having to do an even more dramatic increase the following year if they decide to stay. This will likely piss them off even more. 

@Evan O'Brien- I'll try generalize some of the steps I take, however each person will have their own unique way of operating.

I take more of a top down approach. Starting with high level factors (i.e. demographics) and the go into the granular (condition of property).

1. General Market Research of City/ Area ( i.e. demographics, population trends, Crime, vacancy, expected rents per unit type, market values/trends, etc)- To ensure you are buying in a solid market 

2. Ensure the immediate area around the property is viable (i.e. no serious crime, not in a bad location, etc. )

3. Ensure property type is appropriate for your market( ensure it's not too small, has bad layout, parking, etc.)

4. Inspect property for all necessary repairs and any potential deal breakers

5. Confirm rents, expenses, ARV of building based on inspection of building

6. Legal review (zoning, title, permits, etc)

Again this is not everything, but some general things to consider. 

The two biggest mistakes I can think of that most beginning investors make are underestimating repair costs and overpaying for a property.

To prevent underestimating repair costs, team up with a good general contractor who can give you an estimate of what it will cost.

To prevent overpaying, really make sure you understand what your ARV is and try not to pay more the 80% of the ARV minus costs.

@Nick Gee- I guess it really depends on how you are evaluating the property. If it's purely for your to live in, then I think it is reasonable to go based on your personal preferences, with the realization the costs to convert will be fairly expensive and might not actually add value to the building. 

If the end goal is an investment property, I would be much more cautious with converting, as you might not get the pay off you want. It really is going to depend on your market ,how common they are, and the condition of the existing system. Where I invest, radiators are pretty common and don't impact rents/value that much. I have a building with radiators and have no problem getting tenants. 

Radiators work quite well in my opinion and unless there's a large payoff, it is better just to leave them.

@Stephanie Young- I think you can only charge her for the two weeks it was vacant, and probably the early termination fee. But you should check local laws. Is she demanding it back in full?

Don’t worry about the ethics, you have every right to charge her reasonable fees for breaking the lease. She had every opportunity to research the area before she signed the lease.

@Kim Dillaway- I'm not sure where you are located. A lot of time son redfin, realtor, or zillow they will list the rents/lease end dates. If not then you can certainly try and engage to the broker to disclose this.

@Marcus Johnson- It sounds like you are positioned well for the increased regulations. I hope they come to their senses and follow the Oregon model, and factor in inflation to the yearly increases.

@John Warren-I've been looking at the Waukegan market for a little over a year now.  What areas do you recommend for longer term rentals?  Are the any areas you would avoid?

This is crazy. Not only is a 3% cap ridiculously low, it doesn't adjust for inflation. You can't increase rents after the tenants moves out. What if your rents are 20% below market value? I know plenty of landlords like that. There goes any incentive to improve properties beyond the absolute bare minimum. In 10 years time they will be complaining even more about housing shortages. Current landlords I hope you are close to market rents or have the time to increase rents.

@Alex Tokmazeyskiy- I'd also through Little Village out there.