All Forum Posts by: Sean McKee

Hello BP and NWI investors!

Hopefully my questions will be fairly straightforward and easy to answer.

I’ve done a decent amount of research on Northwest Indiana, however I still have some gaps on East Chicago. Mostly the regarding the rental demand.

How hard is it for you to find tenants? What is your typical vacancy? Can you attract quality tenants?

Thank you for any insights!

@Kurtis R.

I had the same issue a few years back. I spent about a year calling 30+ banks and had few denials on the application. I finally found one that would actually do it. Like people have mentioned above, they do exist. I found each bank has their own nuances. Banks are much more risk adverse to investment lines of credit. You are probably better off searching credit unions and smaller banks.

I would keep researching and cold calling if you really want one.

@Jesse Harris- Your ball parking method is very similar to what I would do. I have a rehab spreadsheet that I use to price repairs. If I had to make quick offer, I would use an abbreviated version of my spreadsheet and combine it with a price per square foot method.

Hopefully I’d be able to make a relatively accurate offer and have my contractors confirm it during the inspection phase. If it’s way off, hopefully there’s room to negotiate!

I think the accuracy of quick estimates are going to depend on the scale of repairs. If it’s strictly cosmetic/surface work, you’ll probably be able to pretty accurate. If it’s a big renovation involving major repairs, there’s a much higher chance your estimate will be way off.

- In Chicago you definitely need to give them notice to raise rents or terminate lease. You should refer to the Fair Notice Ordinance for details. You can find the information at this link. If they have lived there less than 6 months and they are month to month you can give a 30 day termination notice. Otherwise I would refer to the Ordinance listed above and ask your attorney if you have any doubts.

As far as mortgage qualifications I don’t want to speak for all banks, but every time I have done it they use current rents. You can request the rent roll, leases, etc during the attorney review/due diligence phase.

Good Luck!

 @Adrian Miller- That’s the exact issue that would concern me the most with these deals. Investors don’t think they will ever get caught and 95% of the time they won’t. However I had a situation where I was in the process of evicting a tenant. I got an email from the city with some “complaints” from the tenant and her stating the attic wasn’t permitted. Little did she know I had stamped architectural drawings from the deputy building commissioner. I was able to shut that down. I can only imagine the terror that would have come my way had it not been approved by the city. 

That’s all it takes and it’s game over.

 @Drew Sygit - Your advice is spot on and I agree that’s how it should be done. But unfortunately in Chicago this is a very common situation and the truth is there are lots of investors and owner occupants who don’t care. I think everyone else is simply saying that the reality is the seller might simply move on to the next. If he’s ok with that then great, but if he’s not and wants the deal then he should tread more carefully. Ultimately each investor should determine if they can handle the risk associated with the deals.

 I was the buyer. Somehow my team forgot about the zoning certificate during due diligence. When I found out, I checked the city’s site to quickly gauge the status. We were buying a 4 flat, however it said 2 flat. This was obviously not accurate, but still was alarming.

@John S Lewis- I rent to people in this exact situation fairly frequently. You can run a background check based on their name and DOB, some link to ITN and some don’t. Sometimes they have credit and sometimes they don’t. Most of the people have both  W2s and 1099s. I would personally verify bank statements, call employer, and really scrutinize landlord references. If they been living in the US a while, they probably have some kind verifiable information. I can’t charge a larger security deposit for legal reasons and wouldn’t feel the need to. Frankly I would just as likely to lose money the same by a US citizen as an undocumented tenant.

I’ve rented to a decent number of people in this situation over the last several years and have not had an issues yet(fingers crossed). 

@Demetrius Davis I had a similar scare, luckily an old water bill from the 1950s and zoning certificate cleared it up.

The 3 units plus “1” are common and lately it seems a lot of people are willing to pay full value for them. I personally wouldn’t but it’s common enough that you might be ok if you sell in the future.

Good luck!