Chicago suburb: My first investment
Hello all,
Since California RE is getting out of hand, I decided to do a small investment in Schaumburg/Hoffman Estate area. Can you please chime in if this is a reasonable investment in that particular part of Chicago suburb. My offer just got accepted, and deal expected to close by end of July.
Property type: Condo (3bd/2ba)
Purchase Price: $145,000 (cash deal)
Rent: $1500/month
HOA+Taxes+Insurance etc : approx $750
School ratings are good.
Is this a good investment?
Quote from @Sam Tomar:
Folks, I have been debating if I should spend $450 on inspections? This is a condo on 3rd (top) floor. Other than kitchen appliances, there is no other appliances to inspect. No water heater, no heat furnace inside the unit to inspect. Water heater/furnace/Coin laundry are maintained by HOA.
Current tenants are living there for last 1 year, and kitchen appliances are in functional condition. They are not brand new but functional. Bathroom plumbing/toilets all are working fine.
Is there something that might become a bigger issue later on if not inspected and corrected now?
If the deal wasn't agreed to "as-is" you might be able to make back your inspection money and then some. If problem areas are identified in the inspection report you can use them as a bargaining chip to ask the seller for concessions. They don't have to agree but typically will agree to at least some demands to keep the deal together. Also, know that the inspector will look at more than just the appliances. If you are on the top floor you will want to get your inspector up on the roof to make sure that there are no issues there.
Hey @Sam Tomar - I've heard things are getting out of control on the West coast. I am actually from Elgin not far from Schaumburg but now live in Chicago. I think that's a solid area with great schools as you mentioned.
If we had a little bit more information like a BP calculator analysis we could give more feedback on the numbers.
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Contractor IL (#TGC116360)
- Quality Builders
- http://qualitybuilders.com
- [email protected]
Hey @Sam Tomar,
All of these replies have been great, one thing I have been considering and made sure not to overlook is having the following included when calculating my NOE.
Management Cost: In the context of an out of state ownership I would assume between 10-12% (of your yearly gross income) as a fee from a company that would manage the property (Procure tenants, manage any maintenance projects). It would be good to have a solid list of interview questions ready for these sorts of orgs.
Utilities: Knowing which utilities you provide and which you expect the tenants to pay for can be an easy expense to overlook
CAPex/Maintenace: I have been using 10% of annual gross income for this number, conservative for sure, but will help you really find a good deal. 5% for because you never know when things might go wrong. Maintenance can overlap with management cost, so it'll be important you get a sense of what service you can count on the management company to provide.
Just some thoughts from a new poster.
Alec
@Sam Tomar - Hopefully you contacted @Mark Ainley. He has an excellent podcast dedicated to chicago real estate dial into that will give you tons of info. Based on your numbers you can do better with no associations and some debt on the properties. A number of folks suggested it already. In the Chicago suburbs your Cash On Cash return with some debt needs to be minimum of 20% + with DCR of 1.33 minium.
Hoa is annoying. I just sold a condo I was renting and it was the best thing I ever did. Hoa’s have so many rules and restrictions it’s a headache. I’d personally cash out if I was set on the property and get some cash back to find another deal.