All Forum Posts by: Sidney S.

Hey Chicago fam! I have this flip in Bronzeville that has power cut off at the line. Comed stated they need to complete a new business inspection. Ok. Fine. Let's do that.

4 failed inspections later, I'm livid. They have brought up a new and different issue each time. How in the world am I supposed to pass and finally complete city inspections when I'm stuck in this ridiculous cycle?!

Side note: We have completed every task noted. This last one stated that we need to install a deck for ComEd to have access to a box 7 ft off the ground. Am I the only one being knocked for this? Have any of you all had to do this? My contractor stated he hasn't and I personally haven't had this problem. 

Help?

Well @Jeff Petsche, we live just outside of DC and currently hold investments in Atlanta and Chicago. Like you, we feel that our market isn't really accessible due to high capital requirements. When we decided we wanted to invest outside of our area, we tried to do as much research as possible about the Chicago market. We would travel to Chicago to get a feel for the surrounding neighborhoods. We were always talking to brokers about specific areas, figuring out ARV on for-sale homes in the area and then put out tons of bids. This was us figuring out what the market would bear. In the meantime, we also worked to find companies that offered project management for development work we wanted to have done. We have not honed in on all the members of our team and to date, we have been able to hop into several investments in the Chicagoland area. Below are some of my pros and cons.

Pros: 

- You can get into a diverse market, with smaller capital requirements

- You are not limited to just one market, you can have holdings all over the place. Essentially, if there is something negative occurring in one of the regions where you have property, you don't have all your eggs in one basket.

- You can keep your 9-5. You don't have to be present and act as a project manager. 

Cons:

- You're not there. Things happen (or rather they don't happen). We pay a couple individuals who are well-versed in all things real estate to look about for our interests on the ground.

- Not learning about little intricacies of your project. You're paying people to manage a lot of the work you'd probably do if the holding were close to where you live. The learning curve can take a bit longer. 

In general, it sounds like you're positioned well since you have some key relationships already available to tap into. You're definitely not losing anything to take a look and see if an area vibes with your investment goals!

Good Luck!

@Ryan Budil

Although I'm not operating from out of the country, here's my personal experience with our out of state investments. One was a personal home in Atlanta turned rental when we moved out of state. We also had several flips/rentals ongoing in another state. 

With our home in Atlanta, we got a great property manager and have had very few issues. We would travel to Atlanta very infrequently (2x/year) and sometimes we would catch exterior cosmetic dmg that the PM wouldn't.  One of the best things that helped us keep up with this particular property were the quarterly inspections where they would take about about 50 pictures in and around the house. 

With our flips, it's definitely been essential to build a solid team and maintain a presence. Even though you could potentially handle a flip, it would be a lot more risky. With that said, I think that a turnkey would be doable. Just make sure you do heavy vetting of your property manager. Find a site that offers guidance on good interview questions for a PM company and it will help you hone in on what you need.

Good luck!

When we were in your position, we had a tough time figuring out what was right for us. We ended consulting our tax advisor and attorney to make our final decision.

I know there are quite a few people out there that operate their real estate business without ever incorporating. We have investment property in our personal name, but mostly in under our entity. Last tax year, we were disappointed when we couldn't itemize our expenses under our personal name because cost-wise it didn't reach a certain threshold.  If you have expenses related to your entity you can expense those. 

With regards to where you're at, it sounds as though an LLC would be ideal. Please make sure to contact a professional for advice based on your personal needs as I am by no means a tax professional and am simply speaking based off of personal experience.

We prefer to wait and complete condenser install on or after closing day to insure the property is occupied and poses a lower risk of being stolen. We will always complete a cage install if it is built into the contract. 

In first project we entered with our current GC, we gave them money upfront to purchase materials and get started. The amount we give upfront is determined by the phase of the project we are in. We felt it to be completely reasonable for a contractor to anticipate payment to get going so we've never veered away from that path. Admittedly, it would be more convenient to work with a contractor that doesn't require a deposit since we often work with hard money lenders who don't always supply draws to the contractor upfront. 

@Robert Ablorh Would you happen to have any recommendations in the Chicagoland area? 

 Sure thing. We're trying to not let this stall us while at the same time trying to not deal with this question later. Haha. 

 Extremely helpful. This is certainly useful so we can determine how our company will ultimately grow.

 Noted. Thank you for your input! Definitely loving the perks of LLCs.

 Wouldn't an S-corp also offer you tax benefits? (following up with a CPA :D)