Smoking Hot Deal

23 Replies

Hi.  This is my first time posting - I hope this is not inappropriate.

I have a 4-unit multi-family in Chicago under contract for $79,000 that generates $3800-4000 a month and need fast funding.  Can anyone refer me to a lender that might help with this?  I'd even be willing to pay a premium or higher interest rate, as I don't want to let this one get away.  

Thanks in advance,

Teri

Theresa Nardello

    $4,000 a month is a lot of rent for something that only costs $79,000???

    How much renovation do you need?  Are the apartments all occupied?

    What kind of neighborhood are we talking about?  What is the age of the building?  We bought two duplexs (4 apartments)  that generates $4,400  in monthly rents for $330,000.  That costs  more then 4 times as much money for almost  the same amount of rent. 

    Something sounds way off in this deal... Hope you do your due diligence.

    Thank you Crystal - I will.

    Theresa Nardello

      You may want to run a full gamut of numbers on that deal, along with a hefty inspection.  $79k for a deal that generates $48k / year sounds waaaaaay too good.

      Chi-town taxes are steep, and there are definitely some neighborhoods I'd stay out of.

      Blair Poelman, Broker in Utah (#9299425)

      I am not an MFH expert but that surely sounds too good to be true.................no wait this is Chicago so i guess exceptions MIGHT apply.

      If i were you, i would proably have three different inspectors look at it and give different thoughts

      @Theresa Nardello welcome to BP. I'm a Chicago native and have been searching for my second MFH deal in the city for several months now. I would echo the warnings of others on this thread: that deal sounds WAY too good to be true. 

      Please don't get swept up by the promise of the numbers and skip due diligence — not just for the property itself, but also on the neighborhood and rental market in that neighborhood. There are many areas of Chicago that even the most experienced investors won't touch, regardless of how fantastic the numbers look. 

      From everything I've heard, success in the high cash flow / high risk areas of Chicago comes down to knowing the micro markets (and airtight property management). There are "good blocks" and "bad blocks", and they might be literally across the street from one another. If you're willing to post the address –or even just cross streets, if that's more comfortable for you– I'm sure other Chicago BPers will weigh in. 

       if you are interested I highly recommend taking a flight to take a look at the area.

      I invest in Chicago and I see hundreds of these deals everyday and I never bite on them.

      Way too much hassle.

      I appreciate all the good advice and thoughts here.  I'm aware the neighborhood is not the best, but it's not the worst by any means either.  I live in San Francisco and could compare it to several neighborhoods here - where I wouldn't hesitate to invest in.  You obviously don't find deals like this in the best neighborhoods.  I've looked at the Chicago Tribune's monthly crime statistics and it's not hideous.  No murders or rapes.  Small stuff.

      It's a 4-plex and all four units were rented until they recently gave cash-for-keys on two of them ($2500 each).  Two are still occupied.  If all 4 units have been occupied until very recently, it's obviously habitable. It's on a quaint tree-lined street in Lawndale - not wide or busy, surrounded by many other buildings of the same era size.  The 2-bedrooms in this neighborhood rent for $850-1000 a month.  

      I think the big secret is that government foreclosures cannot be listed on the MLS if they are still occupied - so they have to auction them off and take what they can get. I will have it inspected and do my DD, but even if I do absolutely nothing to it, I don't see how I can go wrong. I'm just not seeing any down sides here.

      Teri

      Theresa Nardello

        You don't see how you could go wrong because you haven't walked down that quaint tree lined street in Lawndale...

        @Theresa Nardello ,

        A deal too good to be true?!?

        I'm not an expert on Chicago, but have been there prospecting for properties, and I would heed the warnings of locals from the area - aka @Mike B.  @Joey Nakayama  and @Nick Patterson , ..

        Why did two tenants have to be paid $2,500 to leave? You say it must be habitable if someone was living in it. Habitable and rentable may be two different things.. You'd be surprised sometimes, and interesting to see what condition the unit was when they got bought out to leave.

        Is it a brick or "stick" building? What is the condition? Is the building secure, and will the appliances/copper, etc be there by the time it gets rented? Do you have a property manager who will manage it? What is the tenant profile like? Where did you get those rents from? Why is it that you, in San Francisco, are able to find a deal that no other local investors in Chicago can find/want to buy?

        I think you're incorrect in comparing the worst neighborhoods in Chicago to the worst neighborhoods in SF. They are TOTALLY different. You also stated that the big secret here is an auction, not on MLS. Sorry, but NOT a secret!

        And when you say,

        "..I don't see how I can go wrong. I'm just not seeing any down sides here." You never once listed any of the potential risks of the deal, and just point to the rents. You make me nervous!

        Having said all this, I'm not saying there are no deals out there, and if you can get to a level of comfort in answering the appropriate questions, understanding why the property is sold at such a discount (relative to other auction prices), and have that sort of risk tolerance and confidence, check with @Account Closed at WDB funding and see if he can help you out.

        TOO GOOD TO BE TRUE (efficient market) JOKE:

        An optometrist and an economist are walking down the street.
        The optometrist sees a $100 bill on the sidewalk and yells, "My lucky day! A hundred dollars right on the street" and goes to pick it up.
        The economist stops him and says, "Don't waste your time. If it were really a hundred dollar bill, someone would have already picked it up." lol

        The question is, how inefficient is that market..?

        Apparently, it's a "little known" delusion that gov't owned, occupied foreclosures can't be listed on the MLS, but have to go the auction sites only. BS.

        You are getting a lot of good advice from local Chicago investors. It's obviously up to you to determine if you found that diamond in the rough that they all missed (or passed on), or if maybe they are all passing for a good reason.

        I've worked for major investment firms in both cities and lived in both cities. The two cities are NOTHING alike when thinking about investments so in my opinion, comparing neighborhoods is a risky strategy. For starters, SF is 49 square miles and Chicago is 237 square miles. Secondly, Chicago is very pro development. SF exactly the opposite.

        Just givig you a few things to think about. Best of luck!

        @Theresa Nardello

        I strongly suggest finding a PM that would do that area before you buy.  Not all PM's will go in all areas and they will be able to give you a better idea of what you are getting into.  Section 8 inspections are running 6-8 weeks right now so plan on 2 month's of vacancy, and areas of Chicago have vacancy rates over 20%

        I have heard time and time again of CA investors buying on bad blocks and it taking 9+ months to rent out their units.  

        If you need a PM referral message me

        Brie Schmidt, Real Estate Agent in Wisconsin (#57846-90) and Illinois (#471.018287)

        You assume its habitable. Opinions vary on what is "habitable". I could show you some pics of an apartment in a complex I recently purchased.

        People live in it.

        Is it habitable? Not by my standards.

        Have you seen "Hoarders" on TV?

        Get some boots on the ground to look at it. The numbers seem to good to be true and likely are. I hope we're all wrong and you make a ton of cash flow from it but do your checks for sure :)

        What hundred block is your deal located....trust I am not here to take your deal but advise you on the block. We own properties in Lawndale and surrounding communities. Do you have a quality management company lined up? That is the most important piece here. If you do have a management company lined up, throw their name around for references on BP. On the south and west side of Chicago you find a management company first and then a property but be aware good management is hard to come by.

        Please don't let this chain discourage you but further advance your due diligence.  Any private lender will have the exact same concerns everyone on this forum has so practice answering us now so you are prepared for the private lender questions.  

        @Brie Schmidt

        @Theresa Nardello

        J. M.

        Mark Ainley, Real Estate Agent in IL (#471.003954)

        Mark,

        Thanks for the logical advice.  I'm not discouraged.  I find it fascinating really.  People are just different and have different ideas of where they would comfortably invest.  Here in the Bay Area, Oakland is the hot transitional market.  Investors are scrambling over 100 year old houses and multis in neighborhoods that some would compare to Detroit.  

        No, I don't have a management company yet, and agree it's very important.  Is that a service you offer or can you recommend someone?   I just wrote to you through Linkedin and your company email.  I'd love your insight.

        Thanks, Teri

        Theresa Nardello

          Originally posted by @Theresa Nardello :

          Mark,

          Thanks for the logical advice.  I'm not discouraged.  I find it fascinating really.  People are just different and have different ideas of where they would comfortably invest.  Here in the Bay Area, Oakland is the hot transitional market.  Investors are scrambling over 100 year old houses and multis in neighborhoods that some would compare to Detroit.  

          No, I don't have a management company yet, and agree it's very important.  Is that a service you offer or can you recommend someone?   I just wrote to you through Linkedin and your company email.  I'd love your insight.

          Thanks, Teri

           Teri,

          I think Mark will have a great idea about the area. He came out to share about Chicago landlording in SF at my Summit last November, and is very knowledgeable about the area.

          Btw, I'm not trying to discourage you because the area is sketchy. Just because it's different when it's far away and you don't know the how sketchy the neighborhood/street is there. And yes, I do believe they are different here compared to there. I won't draw any conclusions from you being in Burlingame, but there are many different "levels" of "hood" out there.

          To your point, I own exactly what you are talking about - 100 yr old houses in areas some would compare to Detroit lol (although I still don't think that's an accurate comparison). One is an 1897 Victorian duplex in West Oakland just south of Emeryville Target. Was a great deal. And a newer (relatively) 4plex down in deep East Oakland with tons of cash flow (but not like Chicago CF). I've spent plenty of time in both of these neighborhoods, and it's still not the same comparison to some areas of Chicago (and from what I have heard from folks living or have lived in Detroit).

          But see what Mark says about it.. Whatever you side to do, good luck!

          I know J - we've talked and met at REI meeting a couple months ago, and you looked at a house I had under contract in Oakland.

          Theresa Nardello

            good for you Theresa,

            contrary to what everyone else is saying on your post, it sounds like you know what you're doing and getting yourself into. I'm happy for you and keep us posted on updates!

            Hi Teri

            I would highly recommend Mark's company, they are great and have all the right staff in place

            I have also found in my experience in order to be successful in the "hassle zones" its much easier to own 100+ units than just 6.  

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