All Forum Posts by: Paul Cijunelis

Kevin, sounds like you're a bit new to this and while I did not read all the way down I will offer some advice I did not see up to this post of yours. Since we are both in Chicago, I would highly advise checking into the landlording laws here. 

As Sean Wagner mentioned, the city of Chicago has adopted their own regulations on charging what's commonly referred to as a "security deposit" you need to do it another way. 

Another thing I would say is for you to is to contemplate dropping rent to $1750 if comps are +$2k. In Illinois and especially the city of Chicago, getting rid of a tenant is not easy as some previous posters must believe. Having been in the RE market for many years, I've seen and heard some horror stories. Giving away the place cheap only creates more work for yourself screening lower income individuals, and attracts scammers. Then if they don't' pay and don't want to move, you have to evict which in Chicago means 6-12 months and/or "cash for keys" (landlords please stop doing that it just incentivizes these people). This is very costly to an owner of course. A steep drop in rent just attracts scammers imo. Also stay away from craigslist. Again, scammers.

One horror story... I acquired a 3-flat in Humboldt a couple months ago who had two units not paying (ouch). Two units 11 months no rent, each. Plus damages. Owner was desperate to sell. The price was too good to pass up. If I shared the price people wouldn't believe it so I'll leave it at that. Just finished the rehab, likely will go through the same thing. It's winter, hard to find tenants. the last thing we want is bad tenants who don't pay, though, so while it is listed a bit lower than market it is not a screaming bargain. I am expecting my two units to probably not rent for a bit. Screen hard. Don't bend. Make sure whoever you put in there is financially responsible and I'd do a 6 month or month to month explaining in summer rates will increase.

Keep us posted.

So i built my home about 8 years ago. I had one kid at the time, she's now in HS and the new one is turning 5 soon LOL. Big 10 yr spread there. So I would say that once she moves out we will probably sell our "forever home" and it will mean 10 years-ish is "forever" for us. Because once the oldest moves out, I know the wife won't want to have a large home anymore.

Sorry to hear about your divorce. Sounds like you have your act together with passive income and a savings, as well as motivation to build wealth from there. Congrats, you're a rare find, enjoy your unicorn status!

Looks like Tim and Ezekiel have provided a bunch already...

What are costs associated with snow/harsh winters? Nothing over any service you wanted to provide.

Do property taxes fluctuate? This is public info and usually it will change based on seller being there a long time or something like an elderly tax rate.

What are insurance costs like (we've got a lot of local variability around fire insurance for ex.)?

Most ins providers I work with (chicago, FTW indiana areas) are nationwide. Maybe yours is too. But usually for a tenant occupied it's like $90-120 per month

I've noticed a lot of multi-family buildings are pre-WWII housing inventory - are there restrictions or issues common with that (historic districts, crazy high utility costs, etc)?

You'd need to call the local township which I would recommend doing for any LTBH. Opinion, avoid historical districts...

To me this is a combination of things. Main things being population growth and landlording laws. If those two things are in your favor, you will do well.

Quote from @Kyle Kline:

Quote from @Paul Cijunelis:

Quote from @Kyle Kline:

On a recent Bigger Pockets Podcast episode  [...] 

Kyle some investors are in a different place than others. If you are starting this is an approach that assumes more risk tolerance. If you want less risk it's not for you. the cost of capital right now is forcing some to get deals at par and hope for appreciation (due to inflation). this works if you have other income to offset.

That makes a lot of sense. I appreciate your input!

Kyle, you can fund an entire acquisition with OPM (other people's money). It's your risk tolerance. I rarely use OPM to fund a rehab but I sometimes use OPM to fund an acquisition. For example, I used a HML (hard money lender) to fund the acquisition of a property in Indiana I purchased off-market from someone in foreclosure, but paid for the rehab with my own cash. It's being listed/rented right now. This was an Oct 15th acquisition and took about 2 months to clean out and repair/rehab. So the timeline is dependent on experience, amount of work, contractor trustworthiness and promptness, etc. A typical rehab is going to be 3-4 months, with a month to list/rent. I would figure 6 months carry cost (cost to carry the property while it is vacant). So there's acquisition, rehab/repair, carry, insurance (vacant/contractor insurance, yes there's two types), and any other expenses (closing, etc). If you had eyes on the property and have a good idea on all this you can hit the HML for all the costs and take draws after the initial acquisition to do the rehab for the rest of the amount. Good luck.

The honest answer here is in this marketplace not knowing what you're doing the risk is high.

Knowing what I know now on the forums is totally different. I would invest in ugly houses that need lots of rehab work to build the equity and refi spreads needed to offset the work and preserve most/all of my initial capital. I'd DSCR into the property, and refi trad out. then repeat.

Best advice is to join or visit a local REIA meetup and start shaking hands.

You make the payments. I have subto deals and pay the mortgage. If you are worried about this there are companies that handle servicing these payments automatically on a scheduling system if you have a bunch of them.

Quote from @Kyle Kline:

On a recent Bigger Pockets Podcast episode (link above) the guest discussed the idea of investing for equity and not cash flow. [...] I do not recall them ever discussing how you cover the cost of property repairs and capital expenditures if you are not concerned about the property making extra money each month.

Kyle some investors are in a different place than others. If you are starting this is an approach that assumes more risk tolerance. If you want less risk it's not for you. the cost of capital right now is forcing some to get deals at par and hope for appreciation (due to inflation). this works if you have other income to offset.

Sec 8 opinions will vary. I think I have ten sec 8 properties of my own right now (that I own). All have been good with decent tenants for the last 15 years. I have a new one in IL (tenant state) and rent is 2700 and tenant pays around 700 of that. So it's not all gov funds. Tenant has paid either on time or up to 5 days early. I don't see any issue with sec 8 right now. Maybe that will change. Most are careful about losing their valuable voucher so they are usually good about stuff. Sec 8 here also inspects the home each year, in addition to your PMs inspections (if you have one). It's all what you make of it I guess. I agree with Sid, I screen hard. In a tenant friendly state you have to.

BTW, when you list, there's a fair housing law. you cannot deny a sec 8 if they qualify. your standards need to be the same for everyone

All the hard money lenders I know don't lend unless they can see the deal. Would you lend not knowing where the money is going? Banks don't either. Everyone wants to know where their $150k is going. Network and find a deal, then approach a HML with your numbers and info.