All Forum Posts by: Tom Casey

Hey BP community!

Having spent my first few years working a lot with apartments, condos, househacks, and 2-4 unit investment properties, I recently started looking into expanding my knowledge base and learning more about land deals, development, new construction, and luxury real estate. That's when I decided to join a new team, The DoWell Group, who have represented all types of clients from developers, to investors, to first-time home buyers in hundreds of transactions over the last 10 years. I've already learned so much in just a few months working with them, and today I want to share what I believe to be some of the most important considerations that often get overlooked when analyzing real estate.

I've analyzed hundreds of potential land deals with my new team and it's given me a completely new outlook on real estate as a whole. I now realize how important it is to consider the actual land you're purchasing, not just the building or the unit. My #1 goal as a real estate advisor is to provide my clients with as much knowledge and insight as possible, so that they can make informed decisions on their investments. I want to ensure that my clients are not only content with their purchases, but that their investment decisions make them happy and excited for years to come. Below are three considerations that you should always bake into your calculations. Let's jump right in!

Lot Size

If you've been looking into or investing in Chicago real estate for some time, you're probably aware that the "standard Chicago lot" is 25' x 125'. However, in many areas it's common to see wider/narrower or shallower/deeper lots as well. For example, in Belmont Cragin most lots are typically 30' x 125', while in West Town it's common to see lots that are 25' wide but only 100' deep, or in other pockets you'll find 20-24' lots more frequently. The most important point here is that you should always be well aware of the lot size of a property. This will be crucial for determining its value, because lot size along with zoning will dictate the highest and best use for the land. Even if a building "makes sense" as a rental, I'd be hesitant to buy if it's on an awkward or small lot because that will make it more difficult to sell in the future. You can take a look at Cook County parcels and lot sizes with the CookViewer, link here: https://maps.cookcountyil.gov/cookviewer/ 

Zoning

Zoning is a HUGE deal in Chicago and it can make or break a potential deal. For example, there's a big difference between an RS-3 lot (very common) and an RT-4 lot (not as common). RS-3 zoning only allows for a SFH or 2-unit to be built, and it can only be 30 ft tall, whereas RT-4 zoning allows for buildings to be up to 38 ft tall and allows for more FAR (floor area ratio). FAR is super important for new developments because it determines the maximum above-grade interior square footage. For example, a 25' x 125' lot is 3,125 square feet, so an RT-4 lot at 1.2 FAR would allow for 3,750 square feet (3125 x 1.2) above grade, whereas the maximum for RS-3 zoning is only 2500 square feet. It's crucial to know the pre-existing zoning on a property before buying, drawing up plans, and building because Chicago does not make it easy to get a zoning variance passed. It's very political and can take months or even years to jump through all the hoops. For these reasons, a more favorable zoning makes land considerably more valuable and should always be top of mind, not just for land/teardown deals. You can see the zoning of any Chicago property and read up on zoning rules at 2nd City Zoning, just follow this link: https://secondcityzoning.org/ 

School Districts

Have you ever been looking at comps and seen two properties that are basically right next to each other, almost exactly the same square footage, layout, year built, lot size, zoning, finishes, etc., but one closed immediately for $1,000,000 and the other sat on the market for 3 months and only pulled $900,000? If all other factors are similar, take a look at the school districts. Sometimes there's not as much discrepancy between bordering districts, but sometimes the price gap is undeniable. So whenever possible, always try to pull comps that are located in the same school district, or at least account for the differences in your calculations. That way you can ensure that as a buyer you're not overpaying, and as a seller you're not over/under-pricing. For Chicago Public Schools, there's a super useful tool that I use all the time called the CPS School Locator. Here's the link: https://schoolinfo.cps.edu/schoollocator/ 

Thanks for reading and happy investing!

Tom Casey

Real Estate Agent

The DoWell Group

@Lisa Peck Got it.

So as far as I understand, the unit that you Airbnb out has to be your primary residence, which means that you would not be able to legally Airbnb out a 2nd home/pied a terre. 

As for non-conforming units, as long as you live there and it's your mailing address, you shouldn't have any issues airbnb'ing it.

@Lisa Peck Sorry I don't quite understand, what is your question?

Hey Steve! Sounds like a homerun deal. How did you get away with keeping all 3 as STR? Doesn't the Chicago STR ordinance not allow you to have more than one in the same building?

Hey Mary! Send those deal analyses over, I'd be more than happy to discuss and give feedback.

Hey Rob! Sounds like an exciting route to take!

I agree with Robert that it'll be a good idea to determine the type of build you'll want to pursue and also the locations where you'll get the best bang for your buck. You'll want to run some comps (I can help with that if you'd like) to determine which areas/suburbs you'll want to target. 

I know that @Jennie Berger has a ton of great experience with new construction in Chicago. It would be really smart to connect with her.

Would love to connect with you guys and discuss further!

-Tom

You're 100% not going to find anything "c-class or better" for under $50K

You mean $20-50K for the down payment and closing costs right? Chicago and surrounding suburbs will be your best bet for a long term investment property in the midwest. 

 Definitely wise to research and interview different brokerages! I was with @properties before eXp and I moved because I wanted to learn more about working with investors and The Axon Group turned out to be a great fit for that. If you want to learn more about eXp, I would be happy to hop on a call with you and discuss the agent experience. I could also direct you to talk with my team lead @Jake Fugman, especially if you were interested in joining our team! We use a person (who is amazing btw) as our transaction coordinator and our team leaders Mike and Jake are constantly searching for more leads. We pay a bit extra towards the split with them, but it's worth it in my opinion because they do a lot of the work involved in generating leads and our transaction coordinator helps streamline and organize transactions, which helps a lot as your workload increases. For our personal leads, the team split is much less (85/15) as compared to team leads (50/50 first year, 57.5/42.5 second, and 65/35 third year+). Plus we get a half cap of $8K vs. the standard $16K of other eXp agents.

Love that you're asking about condos! They are an underrated investment vehicle for sure, and can be much more hands off with less property management involved if done correctly. I've helped quite a few clients this year to buy investor friendly condo units. One of the most important considerations when buying a condo as an income/investment property is the HOA rules/regs and by-laws. You won't want to run into an HOA that is not investor friendly. Some HOAs do not allow rentals at all, some only allow a certain % of the units to be rentals, some only allow units to be rented out for a limited number of years, some require the owner to live in the property for 2 years before renting out, etc. I generally prefer for my investor clients to buy when the HOA has no rental cap, or at least when the rental cap is on the higher end and not yet met. Most times, this info should be known by the list agent, but you'll always want to double check the HOA docs to ensure that your investment will be safe to rent out for the long term with no issues down the road. Sometimes you can even find HOA docs on the Cook County clerk website: https://crs.cookcountyclerkil.... 

The other important factor, just like with any other rental property, is going to be the neighborhood. The best condo to own is one that attracts the highest quality tenants and has the lowest vacancy possible. For example, most neighborhoods in or near downtown have pretty much 0% vacancy, high rents, and tenants who are very unlikely to trash your property or miss payments. For cash buyers, downtown condos should be very much on the radar. If you're looking to finance however, it can get tougher to find a condo in an A-B+ neighborhood in Chicago that cashflows with the current interest rates. Then again, it's tough to find ANY property type in the best neighborhoods that's at least breaking even after all expenses, even if you're putting 25% down. That's just the market right now unfortunately.

Would love to hear back from you. Happy to connect and discuss more!

Hi Mary!

Sounds like you had quite the successful investment for your Lincoln Square property. Congratulations! I just moved to the North Center neighborhood last week, so we're pretty much neighbors!

To answer your realtor-related questions:

1) I used an online course called Real Estate Express. It worked well for me and I passed the test first try. They provide lots of study material and practice exams. I'd recommend getting the basic package, I think it was less than $200 when I signed up.

2) I just made the switch to eXp last year and I've been liking it a lot so far! I joined one of the top producing eXp teams in IL, The Axon Group. We're very investor focused (most of us are investors ourselves) and we do a ton of deals with Bigger Pockets community members. I like eXp's commission structure and training opportunities, plus my team provides lead generation tools and a transaction coordinator so I can focus most of my energy on converting. 

If you work hard and form good relationships, making $100K as an agent is very possible. One of the things I like about eXp is that they take an 80/20 split, but once they get $16K, your take home goes up from 80% to 100%! Also, they let you do 3 personal transactions per year without having to pay a split, so that helps for buying/selling your own properties.

Hope that helps and would be happy to chat more. Feel free to reach out!