Investor · Chicago, IL · Member since 2014 · 41 posts · 11 votes
Hey All, I am new to Bigger Pockets. I purchased my first property (a 2 flat located in Chicago) earlier this year (2014) and am looking to expand quickly. The property has numbers that look something like:
2/ 3 bedroom, 1 bath units + 1 bedroom in-law unit in basement
165k purchase price/ 160k FHA loan w 3.5% down
PITI approx 1300 + (200/month for a renovation loan renovating the basement into livable condition) = 1500/month
2 above ground Units Currently listed each at 1250/month. both are currently vacant, one is pending Section 8 voucher application. (hopefully both will be occupied shortly)
Gross rent should be 2500/month
My goals are such:
Buy/ Hold/ Rent Multifamily in Chicago or surrounding areas
Passive NET rental income of 5k+/month
Currently I work a 9-5 and don't have anything saved! I wanted to reach out to the BP community to see if anyone had any thoughts as to how to quickly expand my holdings and ultimately reach my goal of net passive income of 5k or more. Im open to anything creative, and just would like feedback!
Investor · Chicago, IL · Member since 2014 · 41 posts · 11 votes
11y
Although it has 2 entrances and exit-able windows, I'm fairly certain the basement is not zoned for a unit, so leasing it may not be possible. I'm not opposed to spending a few nights a week there my self however.
The building is off of 290 and Austin, the neighborhood is apparently called "the island", a sub-hood of the Austin area i guess? Its relatively safe area, and the particular block is very friendly.
Investor · Chicago, IL · Member since 2014 · 41 posts · 11 votes
11y
Ha! @Frankie Woods , that's an incredibly good question. and one that i'm not sure i can answer?? However i had an estimate generated by a Property Management Co ive been working with, came in at 15k. the work being done is basically a full basement and common area/ laundry room, renovation.
Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
11y
It's always a tough question, especially for us newbies! I'm in the same situation for a property I'm in the process of purchasing, haha! Getting a bid from the property mgt company is very smart. Even more so when you aren't experienced. However, I'd recommend getting at least 3 bids to get an "accurate" assessment of the "fair" price. Food for thought, but not always feasible given time constraints, etc. It looks like you found a pretty good deal for CHI. Meeting the 1% rule is always a good start!
Investor · Chicago, IL · Member since 2014 · 41 posts · 11 votes
11y
Yes @Frankie Woods , i am not experienced, but having a PM in these beginning stages has been incredibly helpful. at the very least their services, allow me to have some peace of mind, knowing i have someone in my corner.... and i do have some time restraints so arranging a second or third estimate might not be feasible.
How are the deals going in your area? What do the numbers look like? How has the owner-occupied strategy worked for you?
Do you plan on living in one of the units, or in basement unit?
If owner occupied, why hire a property manager?
What are your expected total cost of expenses?
Thanks
1) Ultimately i plan on living in the basement. However i am not overly concerned about my living situation: i have a backpack's worth of possessions, and the past 3 years have been a mix of staying at my (now ex) girlfriend's, either parents, or even my car!
2) I chose to use a PM when owner occupied because
a) My first two tenants the one that came with the building, and the one of my coworkers. were horrible. late rent, broken lease, an eviction, and the previous owner even broke into the property to reclaim forgotten property!!!! all within a few months of buying the property. I know i shouldn't rent to people i know, i know i shouldn't let one bad apple ruin the bunch etc etc. But it was very psychologically taxing, especially for a newbie
b) I don't have any handy skills. literally none. and really nobody i know is interested in purchasing real estate or investing in general. so my knowledge base is limited to what i can find out on my own... also being that i work a 9-5 (which is really more like a 7-6) the last thing i want is to be caught unprepared
c) I don't plan on going this route forever, as PMs do eat at cash flow. (just not enough to break the deal for me)
3) My total expected expenses...:
-if we include debt servicing the mortgage and the new loan, and PM and reserve, should be no more than 1800. this is a fairly high estimate. so hopefully its lower. currently i am spending 1300.
Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
11y
They are going pretty well. I've purchased 2 4-plexes over the past year. After repairs, it's looking like about a 15% CoCR meeting the 2% rule at about a 12% Cap. These are pure investment properties. I own a primary in IL, but the numbers are not good... I should have purchased a 4-plex to live in...