All Forum Posts by: Tom Shallcross

Join the Straight Up Chicago Investor Podcast team along with Renovo Financial as we host an evening of bowling and networking fun!

Your ticket to the event includes:

* Bowling & Shoes

* Beer & Shelf Liquor

* Pizza

* Non-alcoholic beverages

This is your opportunity to mingle with the Who's Who in Chicago Real Estate, including investors, brokers, lenders, wholesalers, contractors, and more. 

@Mark Ainley, @Brie Schmidt, @Jonathan Klemm, @Jake Fugman, @Jennie Berger, @Michael J Scanlon, @John Warren, @Henry Lazerow, @RJ D. 

@Matt Michaels - I've referred buying clients to either Sam Sharp or Teddy Kon for this, happy to make an intro to either if you'd like. 

@Daniel Botvynko - Also a happy Renovo client here. Regardless of whom you use, you are going to need more money than you originally laid out. I love flipping and there are nice checks to be made in Chicago, but many folks underestimate the amount of capital needed to succeed.  

As a first timer, you'll prob get 70% ARV or 85% of LTC, whichever is less. Assuming the 350k ARV you mentioned is accurate, you'll get a loan of 245k. If your rehab is 50k that part will be held in escrow until drawn upon, so your original loan balance will be 195k (245k-50k). So you're bringing 55k to the closing table (actually more than thatonce you account for all fees).

In addition, you get your draw money once work is completed so you'll need working capital to order materials and then get reimbursed. You'll also need funds to pay your holding costs, a 245k loan at 8.5% interest only is $1,633/m plus taxes, insurance, utilities, landscaping...etc, so somewhere around 2k/m holding costs.  Lastly, if your budget ends up being 60k or 70k instead of 50k, you're coming out of pocket that difference so you'll need those reserves so you don't get caught stuck with an unfinished project. 

Add it all up and you probably need close to 80-100k to get this done through a HML, whether it's your money or a partner you bring in. This isn't to deter you, it's to prep you so you can succeed when you pull the trigger.

Yes - there is an initial intake application, and then you will need to pay for full architectural plans and submit these plans to obtain your permit. Once the permit is approved, you go through the full plans/permit inspection process. 

Although you may check the box on some obvious items like ceiling height and two forms of egress, you may not be out of the woods. The city will have rough and final inspections for electric, HVAC, construction, and plumbing which may lead to additional work. Given your property will be 4-units, the city will request 5 electric boxes, one for each unit and then the common area.  Depending on your current bathroom count, you may be required to update the water service line which can be a 20-30k hit depending on if the main line is on your side of the street or you need to cross the street and pave it. 

@Samuel Pavlovcik is a self-cert architect that I've worked with in the ADU zone and can help you get started.

@Claudia Del Leola - that's definitely high for a Logan Square move-in. We typically either do move-in fee of $500 or $300 per adult. 

I know move-in fees are much more popular in Chicago than security deposits as the RTLO adds complexity and risk to taking security deposits. However, although the punishments can be silly, the actual rules to follow in the RTLO aren't that difficult. Once you understand it and set up systems so you give appropriate notification and interest payments, it's really not that bad. Therefore I've gone back and forth between move-in vs security deposits.

Here is the Security Deposit section of the RTLO for reference: https://www.depositlaw.com/080

@Kurt S. - getting a paying tenant out in under 5 months in Chicago is not a realistic option unless you are going to offer cash for keys. Maybe offer some incentive to break the lease early as 5 months from now is also October so you're passed the typical "renting season" in Chicago. Can def still lease up a unit in October, but you'll have a much bigger pool of renters in the better weather season.  

As @Caroline Gerardo mentioned, if the lease clause calls out a $ fine per incident, enforce it. If you don't have a fine amount, have your attorney write up some type of formal letter warning them they are in violation of the lease and if caught again you will look to terminate or seek damages (or whatever your attorney thinks is best based upon how your lease was originally drawn up). If caught in the act, you can serve them with notice which may be enough to discourage the actions moving forward, however if they want to take you up on that and ride it out, it won't be done before the lease is up. 

It's a combo of lack of supply (inability to rebuild similar units in a cost effective manner, deconversions, family-owned units that get passed down...etc), superior financing options compared to 5+ space, and just the simple monthly math compared to buying a SFH or renting.

We recently listed a 2-unit that went under contract 40k over ask because there is not a lot of alternatives if that's the area the buyer wants to live in. 

Let's say the buyer pays 465k and has a 5% interest rate. That's a 2,2500/m pmnt assuming 10% down. If tenant below is paying 1,500/m he's living in area he wants for roughly 750/m  P/I payment. You obviously won't find anything ifor 750/m P/I payment in the area and you won't even find rent for double that amount if you want to keep renting. And that's just a 2 unit, obviously the numbers creep closer to actual investor-numbers with a 3 or 4 unit pumping in more rent. 

I'm not saying "wow, what a deal" or to copy this I'm just saying when compared to SFH or continuing to rent, the 2-4 unit househack is very appealing and thus demand is strong.

@Tracey Steele - Under Chicago's Fair Notice Ordinance passed in 2020, below are your responsibilities as a housing provider:

If the tenant has been there for more than three years than you need to give at least 120 days notice. If the tenant has been there between 6 months - 3 years, you need to give 60 days notice. If they've been there less than 6 months, you need to give 30 day notice. 

Below is a link but if you just Google Chicago Fair Notice you'll find multiple similar articles:

https://www.gcrealtyinc.com/blog/new-chicago-landlord-laws-fair-notice-ordinance

Yes, exactly what @Scott McIntosh said. I am a single person LLC for my typical investments and for the LLC for our QOF my wife and I have that exact 99.9% .1% partnership.

@Lucien Perreault - attached is the down-n-dirty info on Chicago's ADU program - https://www.chicago.gov/city/en/depts/doh/provdrs/homeowners/svcs/adu-ordinance.html.

First ensure your property is within the pilot zone. If you are looking to build a coach house, two main rules are the coach house needs to be < 60% of property's required rear setback and also be 700 sq ft of living space or less. 

Get with a GC and/or architect to discuss feasibility. Also note that you'll have to dig through the yard to run water service and utilities back there as well.