Chicago, IL · Member since 2015 · 44 posts · 3 votes
I'm seeing a few properties listed in the 4k-10k range in the Chicago area. The neighborhood doesnt matter much to me. What I wanna know is are the properties in those price ranges worth getting if the cash is on hand and you want to do a quick house hack?
Im sure they need repairst. If snatching up say a 7k house that needs doable repairs and house hacking to get away from renting is possible. Would anyone here say thats a ok start or would holding cash and seeking a Conventional loan be better.
side note: I want to get out of renting before summer 2016 (month2month lease at moment)
Always money to be made in this market but it is a tough road. I have seen many of our investors/ borrowers lose many night sleep over these types of properties. Structural repairs, lead paint abatement, high tenant turnover..... You must be a very engaged and active landlord. And truth be told when people add their time into the equation for such a property the hourly wage achieved through effort is very nominal. I would look for better opportunities personally. Aim higher, achieve more!
I've seen these go both ways and when they go bad its real bad because as I read through the comments people have already said the repair costs don't change no matter the purchase cost of the property. And the city is slow with permits and very strict to deal with rehabs. Lastly the only way I see you selling the thing in a neighborhood that distressed that on market deals are selling for 10k or less would be if you hold the note. Require a substantial down payment and expect them to default on the loan. Evict and repeat. If you hold the properties they usually make good rentals, but that doesn't seem to appeal to you.
I'm seeing a few properties listed in the 4k-10k range in the Chicago area. The neighborhood doesnt matter much to me. What I wanna know is are the properties in those price ranges worth getting if the cash is on hand and you want to do a quick house hack?
Im sure they need repairst. If snatching up say a 7k house that needs doable repairs and house hacking to get away from renting is possible. Would anyone here say thats a ok start or would holding cash and seeking a Conventional loan be better.
side note: I want to get out of renting before summer 2016 (month2month lease at moment)
Here on BP there are those that don't bother with anything less then $30K, $50K, others less then $100K etc. So you can get any number of nays, especially considering these houses are significantly less.
The thing that should be swaying your decision is do the numbers work in your favor. The fact that you're asking tells that you're interested and of course its very affordable to buy...maybe even more then one at a time. Generally, houses that low in price are in rental only neighborhoods. Are you ok, with holding it for some time? If yes then proceed. Now you have to find out about the amount of work that's needed to bring the house up to code aka rent ready status - the cost of repairs, is there structural damage, is it a complete gutted from basement to ceiling and if so how much will it cost and how long will it take?
Basically if each house has an average costs of $60K to get it rent ready with rents around $500/mo will that cover your expenses? Will you be upside down on your mortgage?
However, if you have connections to overseas buyers or a hedge fund you can buy them in bulk then flip them for profit. Either way, there's much to pander.
The price represents the quality of your neighbors and demand for those properties.
7-10k purchase price plus 10-40k rehab....Compared to a decent place that is what? 50-80k purchase plus 10-20k rehab (if any?)
Is an initial 20-50k spread (a spread likely to decrease over time) worth your life and the lives of your family helping you out? Is 150-300 dollars a month saved worth the life of you and your family?
@Chase London...I wouldn't rule it out. I would work with someone who knows the areas that you are interested in that may be able to help you determine whether or not it's a good deal. Many investors assume a low priced house must be a death trap or in a war zone and are not good. That's not always the case. Granted you want to be wise and seek help but just because it a low priced house doesn't mean it's not a good deal and it should not be assumed so by any investor without due diligence being done...
A couple replies mentioned it, but the biggest annoyance/risk with this type of purchase is the city. If this property is hot on their radar as a nuisance, stay away.
I've lost more money on houses that cost me less than $10k than any other homes I've ever purchased hands down.
Echo the above. Look @ www.neighborhoodscout.com on any property you would own. What's the area vacancy rate? Why would your property sell when others don't? Tenants/borrowers/owners always look like the property. I've been looking at an NPL tape of Gary, IN and others, trying to figure out how to make a win/win/win. Tough to do with years and years of back taxes to get through.
The firs question is do you want to live in that neighborhood? If the answer is no, then pass on the house hack.
If you want it as an investment, buy it in an LLC, not in your name, should it go sideways you have exit strategy. Beyond that you have the potential for great cash flow. I have not see many places rent for less than $500, regardless of location condition. Given that as a rental floor, as long as you stay well under $50K all in, you should be fine even with property management. You will need top make sure the repairs are not going to push you over the top.
How about you connect and pick their brains a bit?
Living there in that class is not easy but doable: if the neighbors clean your snow and cut your grass, you are part of the neighborhood already...please make sure to not disappoint them and give something back to the community...
I would also recommend to read @Al Wiliamson, how to be a Leading Landlord, his series of threads here on BP about taking action and change a neighborhood.
also beside your family discount, what does you dad and granpa told you about the neighborhood? (opinions from 30-40 years ago may not apply...)