All Forum Posts by: Xavier Torres

I purchased multi-family in September and one of the tenants has yet to pay rent since. I've tried my best to work with them and not push eviction on them. However, it is a evident that they have no intention of doing their part. Giving the state of the eviction moratorium in Illinois and around the country does anyone think the FHA- owner occupancy standards have any merit?

@Kyle J. and @Wayne Brooks thank you for the clarity. @Brett Goldsmith the principle balance left on this property is $173k. At the minimum, comps in the area go for 250-300 on the low end. @Brian Ploszay when you say that the bank probably wouldn't deal with me..how is it much different then purchasing and REO property from? Is it because at this point, the foreclosure process hasn't been completed?

So I am in the process of purchasing a multi-family home at a big discount from a seller that I am close to that is in foreclosure. I am trying to lean one way or another between doing a deed in lieu for six months and then refinance or approach the bank to attempt a short sale. 

This individual is ready to give up on this property (6 payments unpaid (~15k to make even; current balance 173k, mortgage is ~$1400, taxes 7k, rehab costs ~75k). 

Deed in Lieu: I'm not the most familiar with this process but the concept is we pay the 15k balance, they sign a deed over to us then we refinance in 6 months after doing some of the most important parts of the rehab (i.e. roof, heating and electrical). Then we can start renting the 3bedroom @1600-1800/mo. 

Or

Short sale: Approach the bank as less than what its currently owned. I fear this due to the average time it takes to complete a short sale as well as the fact that this area can bring back a potential appraisal that implies the plot itself is worth $200-250k. 

Have any of you encountered this type of decision point when assessing a similar deal? Any insight, suggestions or feedback are greatly appreciated!

@Reed Meyer glad to hear you’re getting started on your real estate journey here in Chicago.

Let me give you some perspective from a “homer”. I’ve lived here all my life, give or take 5 years for pharmacy school and the like, so I feel that I have a exceptional understanding of the areas in the city. Now that I’ve steadily built my cash reserves, I’m looking to execute the house hacking strategy as well. To that end, DONT deplete those reserves.

Secondly, you have to focus on your strategy right? Are you going for cash flow or betting on appreciation? Seems like you want to do the former and I am on the same boat. I have been in negotiations for this 400k+ property in the Irving park neighborhood. I went through the inspection only to find out there would be > 30k in rehab. At those numbers it wouldn’t cash flow ..not even close if I save appropriately for vacancy, repairs and cap ex. So I’ve drawn a line in the sand and will touch base with the property in a couple weeks to months and see how motivated the seller is post-COVID peak. You may not have this luxury given your timeline but I also wouldn’t rush it.

I grew up under the philosophy that the north side of town appreciates faster than the south and west side of town, which tend to house your lower B and C class properties. Unfortunately, this is where you’ll find the sub-300/400k properties but can also run the chance of riskier tenants. I’ve decided that this isn’t the strategy I want to build my portfolio on.

For safe starters, I’d start south in the McKinely Park Bridgeport area(by Sox park and on the proverbial “come up”), then back up north west along the 90(if possible) through the humboldt park area (historically rich in Puerto Rican culture but on the path to gentrification) up to Jefferson Park. PM if you want to exchange ideas or for insight on the city (as I can best provide). Looking to network with like minded individuals in the area.

In the meantime, stay safe !