All Forum Posts by: Tony Angelos

Hard to see the downside to this if the numbers work with the current income, assuming it's consistent and not depending on the same families coming year in and out due to the relationship with the host. If it turns out to be more trouble, does it still work as a single family home rental?

Also consider whether or not you will be managing the property yourself. As others have pointed out, STR is a lot more hassle, especially if you're paying a cleaning company every 2-3 days as opposed to every 7 days. Not something to overlook.

Looking forward to checking this book out. For those unaware, the bigger pockets podcast covered this on 2/20 when it had the authors on. Really interesting episode where they went over a lot of these strategies at a high level. I saw some comments about people already working with a CPA, and this is not intended to replace them, rather open the conversation that you can have with them.

It helps when talking to a contractor to know what you're asking for; it also helps when talking to a CPA to know what you're asking for!

Do you have prospective renters already in place i.e. friends? Also, is the purpose of doing the individual rooms as opposed to a whole unit to make a deal work financially? I'm also curious, from the lender perspective, if the intent to rent out room by room makes a difference when they go to calculate your DTI.

One last thing, looking at airbnb in mckinley/brighton park, you may be able to list one of the whole units as an airbnb. Some properties in the area have a decent number of reviews and may be less time consuming than trying to fill say 6-8 individual bedrooms. Tax treatment is the same too as heard on the BP podcast episode from 2/20 "Tax hacks to juice your ROI..." It may be worthwhile to also look in the Illinois Medical District to use this strategy considering the city investment being deployed over the next few years.

I came across a value add 14 unit multifamily in an improving area of Chicago and i'm looking from some guidance as to how people have approached similar scenarios in the past.

Here are the details:

• 14 unit; all 1 bed/1bath

1. 50% occupancy currently

• Deferred maintenance; definitely cosmetic and potentially structural too (can't tell from the listing)

The broker's asking price is based on the proforma cap rate based on what the property will likely generate once stabilized.  This seems pretty subjective and can vary greatly based on the rehab costs I feel. I've also heard guests on the BP podcast talk about submitting their offer based on actuals, but in a scenario where it's occupancy is so low, that also feels unrealistic. What are some way's people have actually approached situations like this?

The numbers:

Asking price: 995,000

"suggested" pro forma NOI - 143,599

My projected pro forma NOI once stabilized accounting for an 8% vacancy rate - 136,481 ( so fairly close)

My arbitrary, projected rehab costs max 20,000/unit based on the pictures provided- 280000

Based on my numbers, my more conservative cap rate came out to about 10.7% while the listed pro forma cap rate was 14.43% (substantially different). In fact, I can't even back into the listed cap rate unless I completely remove the rehab costs from my calculations and cut my maintenance cost in half.

SO, based on my calculations of not knowing all the details and maintenance needed, my max allowed offer would have to be 685K, a 30% cut to asking. My approach seems a little far stretched but somewhat realistic I guess if the seller is motivated enough, I'd just like to get some perspective.

Thanks,

Tony

@Trevor Fritz @Jonathan Klemm This is in East Lakeview. The HOA for the property was 537 and looking at other units in my building, most had HOAs of 650-750+ for 1 beds (to your point). I (for better or worse) found the least expensive insurance I could through my insurance broker also, which reduced my monthly insurance cost by ~$45 if I remember correctly. I was also able to search around for PMI and shaved about $25/mo off of the original PMI my mortgage broker suggested.

As for future plans, like I stated in the original post, I'd be willing to do another owner occupied property, house hack, live in flip, etc. and rent out my unit. Alternatively, I'm looking for someone to partner with with a target to get a multifamily in January/February to take advantage of the seasonality, do any value adds throughout the month, then begin renting for the summer season. Feel free to reach out and connect if you'd like to collaborate. 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $190,000
Cash invested: $7,200

Chicago - 1 bedroom condo
3% down conventional, 4% 30 year FRM. $2,000 back in seller credits at closing. $2,000 in cosmetic updated prior to move in. Potential monthly rent $2,100; (projected cashflow next summer with current year rents) - $350.

What made you interested in investing in this type of deal?

Despite the original intent to house hack a 2-3 flat, with the funds available to me, all the properties I found needed extensive repairs. The condo I found had an owner who moved out several months before and was paying a double mortgage. Repairs were easy; painted cabinets in the kitchen, updated lighting fixtures in the dining area and bathroom. Building rent rates supported the price too, even with only 3% down.

How did you find this deal and how did you negotiate it?

MLS. Seller was asking 192,500, I bid 185. Settled on 192 with 2,000 back in closing credits.

How did you finance this deal?

3% down, fixed rate mortgage(4% 30 year), conventional loan. Owner occupied through HomePossible.

How did you add value to the deal?

Existing kitchen aesthetics were very dark and stale since 1985, same with the lighting fixtures throughout the unit. The floors were recently done which was a plus. Got discounted premium paint from home depot sale, painted the cabinets white, updated the hardware on the cabinets too. Updated the dining area light fixture to a chandelier with 8 lights ( as opposed to the original 3 light), and updated the 90s era bathroom scones to more modern ones to match the dining area.

What was the outcome?

Still living in the unit, but intend to rent it out next summer and do the process all over. Hopefully with a multifamily next though if I have more money saved. Based on this summers rental rates in the building, comp 1 bedrooms are between 1850-2200. Currently, my unit would likely fall around 2050-2150/mo.