ADVICE NEEDED: Buying FIRST Property: Mulit Family Chicago

Starting Out
9yFollow

ADVICE NEEDED: Buying FIRST Property: Mulit Family Chicago

Derek Rees
Chicago, IL · Member since 2017 · 3 posts · 0 votes

Hello PB community,

I'm looking to start my real estate investing career by purchasing multi family. I'd be living in one unit and rent out the other(s). Here's some more details about my situation.

I've got excellent credit (800+). The major limiting factor is that I've 12k in savings for down payment. So I'll be getting an FHA loan. May be a 203k if the place needs some work. I am handy and can do some work myself, aka paint and flooring. I do need to commute into the city each day for my full time job

So far my general questions are...

- Being that I'm so new does it make sense to try and go the 203k route or find a turnkey property?

- Knowing inventory is low and should I go the 203k route does it make sense to connect with a wholesaler or scour the MLS?

- I am hearing the South Shore area is a good place to look, what other areas or near burbs would you suggest?

- If you have a free few hours each weekend how would you best invest that time to learn?

Any other thoughts feedback are welcomed.

Best

Derek

0Reply
22 views

9 Replies

Jump to latestLatest
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Derek Rees

    What's your price range?

    $12,000 3.5% down payment would be a $342,000 property.

    What are you doing for closing costs?

    If you go 203K route, you would have to use licensed contractors, you wouldn't be able to do the work yourself.

    0Reply
  • Paul Hitchings
    Alhambra, CA · Member since 2015 · 142 posts · 78 votes
    9y

    Turnkey is another word for "all the sweat equity is gone". Turnkey is what hands off investors buy, not guys (or gals) who can do flooring.

    FHA203K is a dream on paper and a headache in real life. It is useful, but will make you crazy IF you can get it to close.

    Your time each weekend is best spent fixing up a multi-family apartment! There is NOTHING online that is more valuable that improving the value of your own investment ;)

    It seldom makes sense to connect with a wholesaler, they don't really have secret inventories and what they do have has already been filtered through several other wholesalers, like  "these properties didn't sell last time around but how about we give you 10 at once?" 

    If you want a super secret deal, you need to find it from non MLS sources, i.e. direct to owner, tax sale, auction, court house step trustee sale, etc. Doesn't necessarily mean you will get a better deal than working directly with a Realtor or listing agent.

    "What areas would you suggest"  Different investors have different comfort levels.  Ceteris paribus, I would buy the most beat up multi-family in the nicest possible area, presuming it doesn't need major structural work.

    I would drive around parts of Chicago looking for areas you would invest in (and can afford) and find a few multi-family buildings that don't look like they are getting the attention they deserve, contact owners directly. Send about 20-30 letters a month and you will get a call or two eventually. Not the most efficient way to get a deal, but you might find something before it hits the market or better yet, put the idea of sale into an owner's head who wouldn't have otherwise considered it.

    Good luck player!

    0Reply
  • Derek Rees
    OP
    Chicago, IL · Member since 2017 · 3 posts · 0 votes
    9y

    Paul,

    Thanks for the thoughts, much appreciated. I am ready to deal with the headache of the 203k. Being that my initial funds are limited it's one tool, albeit frustrating, that I can use to get into a place. If I'm not scared of that I probably also shouldn't be scared of some sweat equity. 

    Best

    Dr. Rees

    0Reply
  • Derek Rees
    OP
    Chicago, IL · Member since 2017 · 3 posts · 0 votes
    9y

    @Christopher Phillips

    Thanks for the comments.

    My lender will give me 3k for closing costs. I'm going to have to negotiate closing costs with the seller. If I can't obtain any credits from the seller for closing costs, I'm looking at a budget of about 140k. That's might as well be $0 if I'm looking at purchasing a duplex. 

    Best

    Dr. Rees

    0Reply
  • Aaron Vaughn
    Rental Property Investor · Chicago, IL · Member since 2016 · 123 posts · 64 votes
    9y

    hi D! I think I have some excellent suggestions! PM me for details thx

    0Reply
  • Jeff Burdick
    Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    9y
    Originally posted by @Derek Rees:

    Hello PB community,

    I'm looking to start my real estate investing career by purchasing multi family. I'd be living in one unit and rent out the other(s). Here's some more details about my situation.

    I've got excellent credit (800+). The major limiting factor is that I've 12k in savings for down payment. So I'll be getting an FHA loan. May be a 203k if the place needs some work. I am handy and can do some work myself, aka paint and flooring. I do need to commute into the city each day for my full time job

    So far my general questions are...

    - Being that I'm so new does it make sense to try and go the 203k route or find a turnkey property?

    - Knowing inventory is low and should I go the 203k route does it make sense to connect with a wholesaler or scour the MLS?

    - I am hearing the South Shore area is a good place to look, what other areas or near burbs would you suggest?

    - If you have a free few hours each weekend how would you best invest that time to learn?

    Any other thoughts feedback are welcomed.

    Best

    Derek

    There is an in-between of turn key and 203K type properties. In your situation, I would look for a property that is solid and liveable(and will meet the requirements of an FHA mortgage) but has some room for upside through sweat equity since you seem to be pretty handy. Find a place that is in good enough condition that people can live there, but has outdated kitchens and baths, beat up hardwoods, desperate need for painting and other cosmetic upgrades.

    It'd be nice if you could increase your cash some.  Between down payment, closing costs, costs of materials, I feel like you'll go through 12K pretty quickly.  Anything you could sell?  Or ways to save more $?  

    In terms of area, in that price range, I would focus my search on the southwest side.  Pilsen and Bridgeport might be tough to find something in that price range, but I'd definitely look there, as well as McKinley Park, Little Village/South Lawndale, Brighton Park.  

    0Reply
  • Federico Gutierrez
    Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    9y

    multi-family for $140k look in the west or southern parts of Chicago

    0Reply
  • Tushar Shah
    Chicago, IL · Member since 2017 · 96 posts · 12 votes
    9y

    @Paul Hitchings Hey Paul, how does one go about finding addresses/contract details of the owners?

    0Reply
  • Paul Hitchings
    Alhambra, CA · Member since 2015 · 142 posts · 78 votes
    9y
    Originally posted by @Tushar Shah:

    @Paul Hitchings Hey Paul, how does one go about finding addresses/contract details of the owners?

     Contact the city records office. They should be able to provide the legal owner for any property in the city. Try county as needed if unincorporated.

    Other third party websites will have this information as well. Too many to list.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free