House Hacking - Chicago & Philadelphia

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House Hacking - Chicago & Philadelphia

David R.
New to Real Estate · New York, NY · Member since 2016 · 7 posts · 3 votes

All,

First, I would like to say I am new to BiggerPockets and I certainly appreciate a community, like this one, that helps and guides like-minded individuals. I am a 28 year old Finance professional living and working in Chicago, IL. I am tired of renting and missing out on all the benefits of being a real estate investor. Therefore, I am setting the goal of purchasing my first home within a year. However, unlike most first time buyers, I want to house-hack a three unit mulitfamily home in Chicago or the Philadelphia area. While I am starting my research, I am posting this to see if any individuals can share their knowledge or experience on house hacking with me. I am looking to put together a team (lawyer, tax accountant, mortgage broker, etc.) and want to know if anyone has any advice on this. My financing will likely be FHA and I am thinking about creating an LLC to purchase the home. However, I have heard that creating an LLC might cause me issues when I attempt to get financing. Anyway, I am looking to share ideas with like-minded individuals. Any help or knowledge would be greatly appreciated. If anyone is familiar with the real estate investor Scott McGillivray, I share a similar vision as him.

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Derek Martin
Investor & Attorney · Chicago, IL · Member since 2014 · 86 posts · 29 votes
10y

Good luck @David R.. Finding a 3-flat in Chicago that doesn't break the bank but still cashflows is not an easy task. But it can be done. I've met quite a few at our local meetup that @Brie Schmidt has helped. Good luck!

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  • Account Closed
    Investor · Chicago, IL · Member since 2015 · 189 posts · 47 votes
    10y

    Hi Gad! Welcome to the BP community! Congrats on taking action and working towards your financial independence! Recently I've headed a group of  Chicago BP   investors that go out every Saturday to view properties and make offers using no money down lines of credit. I have documented our experiences in the investor deal Diaries forum under the name project BP. We have a lot of fun learning about properties and taking action! Please check out the links below and let me know what you think! 

     https://www.biggerpockets.com/forums/522/topics/28... https://www.biggerpockets.com/forums/522/topics/27... https://www.biggerpockets.com/forums/522/topics/27... https://www.biggerpockets.com/forums/522/topics/27...

    0Reply
  • Jasmine Dixon
    Chicago, IL · Member since 2016 · 26 posts · 5 votes
    10y
    David Reusch Welcome David!! I am also in Chicago and new to BP, this site is very useful, you will love it. I would recommend reading all of the guidelines and downloading the books and listening to the podcast. They have forums for any question you can think of as well. We have similar goals, I too want to buy MFH with FHA loan and thats my goal by this years as well. I am also learning to become a wholesaler. Good luck!
    1Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    10y
    Originally posted by @David R.:

    All,

    First, I would like to say I am new to BiggerPockets and I certainly appreciate a community, like this one, that helps and guides like-minded individuals. I am a 28 year old Finance professional living and working in Chicago, IL. I am tired of renting and missing out on all the benefits of being a real estate investor. Therefore, I am setting the goal of purchasing my first home within a year. However, unlike most first time buyers, I want to house-hack a three unit mulitfamily home in Chicago or the Philadelphia area. While I am starting my research, I am posting this to see if any individuals can share their knowledge or experience on house hacking with me. I am looking to put together a team (lawyer, tax accountant, mortgage broker, etc.) and want to know if anyone has any advice on this. My financing will likely be FHA and I am thinking about creating an LLC to purchase the home. However, I have heard that creating an LLC might cause me issues when I attempt to get financing. Anyway, I am looking to share ideas with like-minded individuals. Any help or knowledge would be greatly appreciated. If anyone is familiar with the real estate investor Scott McGillivray, I share a similar vision as him.

     Welcome to BP!  This is a pretty common way for people to start.  What area are you looking in?  

    I work on the North Side and can send you examples of properties that have come up over the past year, that way you can see what kind of numbers to expect

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    1Reply
  • Justin Pillion
    Investor · Naperville, IL · Member since 2015 · 166 posts · 28 votes
    10y

    Welcome @David R. you'll find a wealth of knowledge here on BP. I'm also glad to see another young professional taking control of their financial future. I have an excellent team on the ground in Chicago that specialize in your exact strategy. Shoot me a message if you need a referral.  

    1Reply
  • Matt Souza
    Investor · Ann Arbor, MI · Member since 2016 · 69 posts · 38 votes
    10y

    Hi David,

    I am currently in the process of putting offers on some 3-4 unit properties in the Chicago area using FHA financing and have some of my team in place. Feel free to reach out to me directly and I will share whatever knowledge and contacts I have. Good luck!

    @Brie Schmidt Would it be possible for you to send me some of those examples of properties in the Chicago area? I would really like to see your numbers. Thanks!

    Matt S.

    0Reply
  • David R.
    OP
    New to Real Estate · New York, NY · Member since 2016 · 7 posts · 3 votes
    10y

    @Brie Schmidt Thank you for reaching out. I'll be sure to direct message you. Seeing your numbers would be greatly appreciated. I currently live in Lincoln Park, but I assume price will dictate me to look around the West Loop area. 

    @Matt Souza Thanks for the note. I'll be sure to direct message you as well. Any information would be great. Again, I want to know more about the entire process and how you are legally structuring this (LLC, etc.). Any market knowledge would be greatly appreciated. I have a ton of questions.

    0Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    10y
    Originally posted by @Matt Souza:

    Hi David,

    I am currently in the process of putting offers on some 3-4 unit properties in the Chicago area using FHA financing and have some of my team in place. Feel free to reach out to me directly and I will share whatever knowledge and contacts I have. Good luck!

    @Brie Schmidt Would it be possible for you to send me some of those examples of properties in the Chicago area? I would really like to see your numbers. Thanks!

    Matt S.

     PM me your email.  I'm out of town but can send it tomorrow

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    0Reply
  • Damian S.
    Real Estate Broker/Investor · Chicago, IL · Member since 2015 · 106 posts · 22 votes
    10y

    David - If you want to use an LLC to hold the property you would me missing out on the home sale tax exclusion of $250k/500k when you sell (individual/married) and homeowner exemptions. If you are set on using an LLC for liability purposes, you would most likely also need to come up with at least 25% down payment since its an investment property and FHA might not be a choice for that reason. You will need to do a whole ton of research on this before you pull the trigger. Three flat in West Loop will probably run you at least $600k so that's a huge commitment for a first investment.

    1Reply
  • Derek Martin
    Investor & Attorney · Chicago, IL · Member since 2014 · 86 posts · 29 votes
    10y

    Good luck @David R.. Finding a 3-flat in Chicago that doesn't break the bank but still cashflows is not an easy task. But it can be done. I've met quite a few at our local meetup that @Brie Schmidt has helped. Good luck!

    2Reply
  • Dan ShelhamerPro Member
    Realtor · Mesa, AZ · Member since 2015 · 163 posts · 99 votes
    10y
    David Reusch welcome to BP! There is a wealth of knowledge here that has helped me tremendously. Another option you may want to consider is house hacking with friends/family. I bought my 1st home 2.5 years ago, and accidentally got into this. I used FHA financing, and just last week was able to refinance to drop the PMI off. One of my buddies from college has been living with me the entire time as well as my brother, both of which pay me a rent in cash. It's a great starting point to see if you like being a landlord, and has really ignited that RE bug in me. I'm currently looking for my 1st "true" investment property right now in Lake County. Feel free to reach out if you have any questions at all, and good luck!
    0Reply
  • Melissa Gittens
    Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes
    10y

    @David R. Welcome to Biggerpockets 

    0Reply
  • David R.
    OP
    New to Real Estate · New York, NY · Member since 2016 · 7 posts · 3 votes
    10y

    @Melissa Gittens Thanks! I have to keep that growth mindset and continue learning. While I am still navigating the resources, Biggerpockets has been great so far. 

    @Dan Shelhamer Thanks for reaching out. I want to ask you a couple questions regarding your experience so far but also about your 1st "true" investment property search. I'll follow up directly.

    0Reply
  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
    9y

    @David R. How has your investing been going? Any updates? Also wanted to know why you asked about House Hacking in Philly since you live in Chicago? 

    Good luck!

    0Reply
  • Matthew Wasley
    Philadelphia, PA · Member since 2017 · 12 posts · 1 vote
    9y

    @Maxwell Lee I'm curious as well! Considering the strong 2016 Philly had with new construction building permits issued. Especially for RSA5s and RM1s zoning classifications ( ... they represented nearly 50% of the 1300 properties issued those permits). 

    0Reply
  • Arpan Patel
    Investor · Chicago, IL · Member since 2010 · 504 posts · 191 votes
    9y

    @David R.: I am helping my best friend do that very thing right now. I live in Uptown and our property are in the south suburbs but he lives in Andersonville and doing looking in that area. PM me and I can discuss his scenario and see if I can help you along as I am him. Also, I can refer some professional vendors if you'd like. Good Luck!!

    0Reply
  • David R.
    OP
    New to Real Estate · New York, NY · Member since 2016 · 7 posts · 3 votes
    9y

    @Maxwell Lee @Matthew Wasley @Arpan Patel I am in the process of building up cash for a down-payment. I had a couple unfortunate things occur and my cash balance got reduced. I am looking to fund a house-hack (small multi-family) with an FHA loan. In addition to getting my financial house in order (saving money, figuring out how much I need to save, details with a FHA loan), I'm struggling on deciding between purchasing a home in the Chicago area or Philadelphia area. I am currently living in Chicago (Lincoln Park) and working in the Chicago Loop but there is a long-term desire to move back home in the Philadelphia suburbs. My plan is getting everything together over the next 6 months and then actively hitting the housing market in 2018. If anyone knows any investor that achieved what I'm looking to do in any capacity, please let me know. I'm looking to put together a team (real estate lawyer, CPA that doesn't break the bank and specializes in real estate, possible lenders, etc.).

    0Reply
  • Michael Facchini
    Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
    9y

    Hi David, and congrats on the decision to get into real estate investing.  Certainly a great time now with where the market and rates are at.  I can actually speak to your question directly, as I have owned property in Philly and Chicago, and I definitely prefer Chicago.  I'm born and raised here, so perhaps I'm biased, but I also found it was easier conducting business here (namely in terms of property management and quality of tenants) vs Philly.  I also find the ratio of income to rental rates to be healthier in Chicago. 

    Now, I'm only one person.  I'm sure there are others that have invested in both cities and perhaps prefer Philly.  I however have no interest in investing there again anytime soon, whereas Chicago is a place I am continuing to put my money. 

    As for 2-4unit lending, that is something I know quite well and would be happy to advise. You mentioned an LLC in your initial post, and you are correct that this will complicate things. The beauty of multi-family property up to 4 units is that you can finance them under residential loans - better rates/fees/terms. The drawback is lenders, FHA or conventional, will not allow you to close under an LLC.

    Hope this helps and hit me anytime with questions!

    0Reply
  • David R.
    OP
    New to Real Estate · New York, NY · Member since 2016 · 7 posts · 3 votes
    9y

    @Michael Facchini Thanks for reaching out. After further review, I will not be creating an LLC and will be buying the in home in my name. For asset protection, I will be seeing an umbrella policy to cover any future liability. Would you be interested in grabbing coffee sometime soon? I work in the Loop and would enjoy hearing about your ownership in both Chicago and Philly.

    0Reply
  • Michael Facchini
    Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
    9y

    That's what I've done with most of my properties to be honest.  I have a hazard policy for each property, and then a large umbrella to blanket over them.

    As for meeting up, would love to but I am leaving Friday for Italy for 2 weeks.  I am back mid-July, will have some clean up to do as I get back in the swing, but could meet or chat late July likely?  Drop me a line then?

    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @David R.:

    My financing will likely be FHA and I am thinking about creating an LLC to purchase the home. However, I have heard that creating an LLC might cause me issues when I attempt to get financing.

    You can't finance a property using an LLC & an FHA loan.

    312-681-7487
    0Reply
  • David Weintraub
    Lender · Berkeley, CA · Member since 2017 · 1k+ posts · 549 votes
    9y
    I live in Philly and can connect you with lawyers, agents, info, etc Feel free to message or email me
    0Reply
  • Chris Martino
    Rental Property Investor · Jersey City, NJ · Member since 2014 · 157 posts · 47 votes
    9y

    Hi @David Weintraub,

    I am currently living in New Jersey and have one buy & hold property in Asbury Park. I am relocating to Philly in the next 2 months and I have seen your name pop up on a few forums. I would love to connect at some point.

    0Reply
  • Kenneth Cowan
    Chicago, IL · Member since 2015 · 97 posts · 55 votes
    9y
    David, If you want to bounce any ideas I'd be happy to discuss with you. I also live in Lincoln Park, and am buying a 3 flat to house hack in Portage Park next month. Michael Facchini has helped us secure the loan, he's great to work with.
    0Reply
  • Anthony Bernabei
    Real Estate Professional · Bolivar, OH · Member since 2017 · 3 posts · 0 votes
    9y

    Welcome to the community my friend. Just visited Chicago for a weekend get away; believe me, there are some good deals floating around the Windy City. Look around Huntley, IL. Good homes

    0Reply
  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
    8y

    @David R. Thanks for following up. Sorry to hear about your setback. Good luck! I hope to follow this story for many years and see a positive trend/outcome. 

    At some point in the future I'd like to invest in Chicago or Philly, which is the reason for my interest in the thread. I've mostly done cheap cash flow markets, but would like to get in on something in a more major market if for no other reason than I'd like to have a property in a vibrant urban city that I can spend time in a few decades from now lol. 

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