My Strategy is Buy and Hold a Duplex in which I plan to live in one and rent the other (if I can afford it); and my niche is an area within 50 miles from O'Hare International Airport, Chicago, IL. It took me months before I found a property which satisfy my criteria. The property is at Tinley Park, IL. It has 3 beds and 2 baths on the second floor, 5 beds and 2 baths on the first floor which is duplex to the basement. Total square footage is 2,770, sitting on a 5,095 sq ft lot. It was built in 1979. It has an 8 year old roof. Current owner pays $167/ month for insurance, $100/month for water and $55 per month for scavenger. Rent total is $2,850. The list price is 250K and I offered 210K which the owner accepted. This is a short sale and according to my agent it will take for the bank to decide 3-6 months if they gave it to me or not. I'm going to send the escrow money today but I have a lot of doubts; 1. My rental property calculation shows that at $210,000 purchase and 15% down, the Monthly cash flow is -$94.73 and Cash on Cash ROI is -2.64%. On the other hand, at 20% down, the Monthly cash flow is $76.64 and Cash on Cash ROI is 1.72%. 2. The seller seems to agree with my offer so quickly. 3. Although the Duplex is just 37 minutes away from work, it would take me one hour and 15 minutes to travel per google maps. 4. I started investing without a team; real estate agent, inspector and attorney. So I have to look for an attorney and inspector today since we signed the offer agreement last July 15, 2017 and because my coworker told me not to hire the ones my agent recommended. So, should I buy this property or not? Your advise is highly appreciated.

@Cenddie Alaban good luck!!! And it has been said by many, but you make your money when you buy, not when you sell. And like I said I am conservative, I don't want to speculate on appreciation, until I know that it won't be the factor that makes or breaks the deal. Keep us all posted!

Hi @Rick Pinney Thanks for the many tips. I'll try to bring down the insurance thru homeowners insurance - that's a great idea!!! I also read somewhere in BP about Tax Strategist, I will look into this. Thanks for letting me know about the possible deadline in Tinley Park, I'll look into this also. I initially thought that this is a good property for appreciation, but it looks like it would be an average. However, these are all my guess. I will not know if I won't push thru. I will know in three weeks if the Seller's Lender will accept my offer for this short sale.

Would this be a good Buy for a Newbie

Paul Hitchings

Alhambra, CA · Member since 2015 · 142 posts · 78 votes

9y

So, the duplex is a classic buy, but if you don't plan on rehabbing it, or it doesn't need rehab, you are leaving dollars on the table. Maybe rehab isn't your thing, but many new investors use sweat equity as a way of increasing their reserves.

Would this home benefit from future renovations and how do you feel about them?

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Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

9y

The rent to purchase is good however the expenses make this a bad deal. Not really worth it as a investment but as a home that is irrelevant.

If you can raise the rents or reduce expenses it may be OK but to maintain cash flow you need to leverage this property to the maximum. Do not make the mistake of allowing equity to grow and keep the DP to the bare minimum.

Mu advice would be to not invest in this property since the effort will not be worth the payoff unless you can drastically increase cash flow.

1 Reply

Jeff Valentino

Residential Real Estate Broker · Winston Salem, NC · Member since 2011 · 345 posts · 120 votes

9y

Hi there @Cenddie Alaban I'm pretty sure I know the area of Tinley you are looking in. Here are a few points to consider-

It sounds like the current owner has it as an investment and doesn't live there right? If you plan on living there you will get a homeowners exemption on your property tax which will help your cashflow numbers. Especially with how high taxes are in Tinley.

So you trust your co-worker more than your agent when it comes to choosing people on your team? Can I ask why?

Part of a good agents job is to make sure the transaction goes smoothly, and to take some of that burden off of you. Your agent should have multiple good recommendations that they have worked with in the past. It's much easier than just googling people and hoping you get a good one imo.

Did your agent give you rental comps to show what you could get in rent? Did you see purchase comps to come up with your offer, or how did you come up with it?

If the owner is under financial hardship, that would explain why they took your offer so quickly.

3 Reply

Cenddie Alaban

OP

Chicago, IL · Member since 2017 · 61 posts · 15 votes

9y

@Paul Hitchings Thank you for your advise. One of my friend who used to be a contractor will go with me on Thursday to look at the property with an inspector. I will be able then to know if it will benefit on a rehab. My first impression when I visited the place is that it does not need rehab only cleaning and changing of carpet on the second floor when the tenant leaves. For future renovations, honestly, I don't have any idea, I will ask my agent, my inspector and my friend latter. How do I feel about renovation? I'm for it, I'm not handy but I fix my own car for years and I love the idea of my kids helping in the renovation.

@Thomas S. Thank you for your effort in giving me advice. Currently, the rent on the second floor is $1,100 and the second floor of the duplex on the other side of the street is advertised at Trulia for $1,700 (and was rented $1,700 as per Zillow). Yes, I think I can raise the rent and rehab the place when the tenant leaves. Is DP, down payment? I will stay in this duplex if I got it for a long time and I can rent the two bedroom in the basement to stay-in caregivers.

@Jeff Valentino I'm thinking that you even know the owner. I never thought how a homeowner exemption can increase cash flow, thank you for that idea.

Thank you for removing the doubt I have for my agent. I just felt that this transaction goes too fast compared to my failed offer at Melrose Park. Of course, I should trust my agent more than my coworker, he does not have a house anyway.

Yes, my agent showed me comparable duplexes around the property: 5 bed 3 bath =$240,000; 5 bed N/A bath =$240,000; 6 bed 4 bath =$210,000; 4 bed 4 bath =$250,000; 6 bed 4 bath =$220,000; 5 bed 2 bath =$249,900 and 5 bed 3 bath =$217,500.

I'll ask him for comparable rents.

Would this be a good Buy for a Newbie

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