Home Inspection Results - NEED OPINIONS!

Lee Stephens · 2021-01-26T08:00:13-08:00

Hey BP, I have a 4 unit under contract in Elgin, IL that just got inspected. I have some questions regarding the report as I would like additional opinions on how serious these issues may be and if it is worth proceeding with the deal: 1). There was seepage and required tuckpointing repairs noted in the basement (the basement is unfinished and used for storage / laundry / mechanical purposes) - is this something I should be seriously concerned when thinking long term and what might these issues point to? 2). Windows throughout building were drafty. There are at least 35 wood single pane windows which all appear to be in average condition, however there is evidence of caulking - How long do you typically budget a window to last before repairing? This concerns me due to the future cost to replace these windows. 3). 100k (estimated) BTU Boiler is 21 years old - said to be in good condition but I understand that this is fairly old for a boiler. Should I expect to have to replace it soon? 4). The heating system is not zoned, but there is evidence (one for each unit) that it was once zoned in each of the 4 units as there are 4 separate pipes and old thermostats in the units that are inaccessible. I don't understand why an owner would unzone the heat and I'm wondering how costly it would be to re-implement the zoning system. *DISCLAIMER* - this is my first deal under contract and I am the least bit handy; therefore, I am expecting a lot of the inspection results to sound scary (and they do), but I also don't want to walk into a bad deal. Any help/advice is greatly appreciated. The listing is below. Thank you!! https://www.redfin.com/IL/Elgin/532-South-St-60123/unit-3/home/16932194

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

5y

Why would the boiler be $100k? Try like less than $10k.

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2 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

Originally posted by @Russell Brazil:

Why would the boiler be $100k? Try like less than $10k.

Sorry for any confusion. The boiler is around 100,000 BTU.

1 Reply

Manuel Cordova

Member since 2020 · 3 posts · 4 votes

5y

Lee,

let me see if I can help. These are just my opinions on what I would do. Seepage - is it coming from the walls or from the ground? If from the walls that’s a different issue and would need you would need to get that tuckpointing done on the outside and inside. If coming from the ground. You may need to see if the water is draining into a sump pump. From the photos I can see it looks pretty clean. Windows - I would only worry about them if they are bad. Drafty you will always come across. I would look to repair or replace them if they are a hazard. From looking at the photos it is vacant. So this would be a good time to just go around and reseal if necessary. Boiler - if in fact it is that old. I would get quotes to replace if necessary. Look to try and see about condensing units that are more efficient. Either one or many depending on how you want to manage the heating. Remember these are rentals. You want to make things easy for yourself. So you don’t have to make frequent visits to maintain it outside of the normal visits. But you already know that as you are a PM. Let me know if that helps.

1 Reply

Brian Detlefsen

Elgin, IL · Member since 2016 · 20 posts · 7 votes

5y

Lee,

I agree with what Manuel mentioned above. In addition, it looks like you have a drain in the floor of the basement. I doubt that you have a sump pump. If you do, then there were probably big water issues in the past and that was the solution at the time. It looks like all of your downspouts from your gutters drain right next to your foundation. Try to direct the water as far away from the building as possible.

The building is an old building (96 years), it appears that none of the windows will be a standard size. I wouldn't replace unless you have to. If this is in a historical district in Elgin, you will have a bigger problem replacing windows. In Elgin, I have seen people replace the windows with shorter windows and block out the gap with plywood. Not very good looking, but functional I guess.

You also don't have coin-op laundry. I'm sure the tenants have their friends over to do their laundry for free (at your expense). Plus, you can charge extra for garage space, weather it is to your tenant or not.

Lastly, you don't mention it in your post, but check the breaker box. If it has Federal Pacific Stab-Lok breakers, your insurance company will require that you replace everything ($$$). They are a fire hazard (don't ask me how I know this). There are/were a lot of these breakers in Elgin.

5 Reply

Manuel Cordova

Member since 2020 · 3 posts · 4 votes

5y

@Brian Detlefsen

Brian, good addins for looking at other ways that water comes in.

The building looks good from the photos.

Not sure I like the price, but I guess it is what the market dictates.

Good luck and congrats.

2 Reply

Melchor Domantay

Rental Property Investor · Berwyn, IL · Member since 2016 · 66 posts · 11 votes

5y

Hope this adds value:

I don't think the seepage is a problem. Old buildings such as that bound to have vertical cracks in the basement and those are easy fix if that this the problem. As far as tuckpointing goes, ask your agent or someone that knows tuck pointing if that something that you need to be concern about.

Windows are tricky - is it really bad that you need to change it? if its not that bad then just leave it.

Boiler can last for a long time as long as you maintain it.

You have to account that if you unzone the heating unit that you are buying 4 separate units not to mention the cost to do it and will increase your capex. The easiest way is to add the heat cost to the rent.

I understand buying your first deal is scary and there's a lot of unknown but hopefully you have a good agent that knows what they're doing and trust them. It doesn't matter if the building is a new rehab. The inspector will still find something that you might have a concern about.

1 Reply

Dave Madoch

Chicago, IL · Member since 2013 · 54 posts · 35 votes

5y

Hi Lee

I wouldn't worry too much about the seepage especially if the inspector is just recommending tuckpointing. The inspector puts that in there to protect himself. They also need to find something wrong with the property.

The building looks like a beautiful first deal to have under contract. The rents look good and if they are under market value(I am not familiar with Elgin) the vacant units should be easy to start your leases with the market rent you should be getting.

Windows - I wouldn't replace until you need to.

Boiler - just get it serviced and you would be surprised how long they can last

I am with you, not very handy. I can paint a room if I wanted to but I generally find it best to outsource maintenance and repairs especially if you find the right contractors. If you are working with a good agent I am sure he/she would have contacts for you.

Congrats on your first deal! Welcome to the club!

0 Reply

Chris Winslow

Investor · Berwyn, IL · Member since 2018 · 104 posts · 71 votes

5y

Hi @Lee Stephens, Congratulations on getting the first deal under contract, that’s awesome! From the looks of the pictures and price to rent ratio, it sounds like a great deal for the area. That should very conservatively exceed the 1% rule, which can be difficult to even meet in the Chicago suburbs.

No deal is 100% perfect, and everything sounds scary on the first one. I just completed my first purchase about 6 months ago in Berwyn. I ended up purchasing ‘as is’ so as you can imagine I was pretty nervous getting into closing and I had not really done a lot of work on houses before I moved in. You’ll find a lot of things are surprisingly easy with youtube, helpful folks at the hardware store, and BP.

1- For seepage- leaks are not uncommon but I would rely on those more experienced around you, especially if you went to see the property with someone else, get their perspective if you are unsure
2- Drafty windows are not uncommon in the area either, especially with older houses. Replacing that many windows can add up but from the pictures they look to be in pretty good condition so I think you would be able to leave them alone. Other options may be to restore/refinish the windows which I have a friend doing now and it works surprisingly well for old windows or there are also simple draft stoppers and shrink film that can be purchased relatively cheap from your local hardware store.
3- Boiler is a bit old but if it functions properly you may have a few more years left in it. Knowing the age of the boiler means you can budget for it going in and it won’t really be a surprise later.
4- Really interesting that it would have been unzoned…You could either calculate the heating into your numbers initially as one of the costs you pay as a landlord or you may be able to divide costs evenly over the tenants as long as you are clear with them that this is the case. I am not sure what the costs would be to separate everything back out but as you get into the house you could get a few estimates on what that would cost, and you may find that there is a good potential ROI there.

I looked at a lot of deals before I bought and I can say overall it looks great for the area. The first deal is mainly about learning, I can tell you that I have learned so much over the last few months and guarantee you will too. Super lucky that you found a 4-flat that beats the 1% rule in that area!

0 Reply

Vincent Mazzaferro

Rental Property Investor · Elmwood Park IL · Member since 2016 · 45 posts · 10 votes

5y

@Lee Stephens

You said this is your first deal. I can tell you that this property is in WAY better condition than the condition of my first property. Every property has problems and things that can be fixed or improved. This property looks clean and nothing you mentioned was a deal breaker to me. From the pictures it seems that you can rent it out tomorrow (although maybe not at the top of the market). I think you need to ask yourself some questions.

How many 4 unit properties are currently on the market with a new boiler, all new windows, and a perma-sealed basement for $400k?

How much cash are you risking to gain control of this asset and it's $4,000 monthly revenue stream?

How much do you REALL NEED to spend to make this asset perform?

Where else are you going to put your cash to generate a return or hedge against inflation?

If this first deal of yours is the all popular, FHA, 4-unit house hack, I would advise you to jump in. You can't make a better decision on a first property purchase than that. I myself bought a 3-unit, on an FHA loan, 3.5% down, house hacked, and it was a game changer for me. Taking control of your first real estate asset will most likely be game changing for you too.

0 Reply

Dennis Wayne

Member since 2020 · 339 posts · 356 votes

5y

Well for some reason You never told us the numbers on the deal . That will help determine if these are concerns relative to the value .

0 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

Originally posted by @Vincent Mazzaferro:

@Lee Stephens

You said this is your first deal. I can tell you that this property is in WAY better condition than the condition of my first property. Every property has problems and things that can be fixed or improved. This property looks clean and nothing you mentioned was a deal breaker to me. From the pictures it seems that you can rent it out tomorrow (although maybe not at the top of the market). I think you need to ask yourself some questions.

How many 4 unit properties are currently on the market with a new boiler, all new windows, and a perma-sealed basement for $400k?

How much cash are you risking to gain control of this asset and it's $4,000 monthly revenue stream?

How much do you REALL NEED to spend to make this asset perform?

Where else are you going to put your cash to generate a return or hedge against inflation?

If this first deal of yours is the all popular, FHA, 4-unit house hack, I would advise you to jump in. You can't make a better decision on a first property purchase than that. I myself bought a 3-unit, on an FHA loan, 3.5% down, house hacked, and it was a game changer for me. Taking control of your first real estate asset will most likely be game changing for you too.

Thanks Vince, I appreciate the insight! Let's connect sometime

0 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

Originally posted by @Chris Winslow:

Hi @Lee Stephens, Congratulations on getting the first deal under contract, that’s awesome! From the looks of the pictures and price to rent ratio, it sounds like a great deal for the area. That should very conservatively exceed the 1% rule, which can be difficult to even meet in the Chicago suburbs.

No deal is 100% perfect, and everything sounds scary on the first one. I just completed my first purchase about 6 months ago in Berwyn. I ended up purchasing ‘as is’ so as you can imagine I was pretty nervous getting into closing and I had not really done a lot of work on houses before I moved in. You’ll find a lot of things are surprisingly easy with youtube, helpful folks at the hardware store, and BP.

1- For seepage- leaks are not uncommon but I would rely on those more experienced around you, especially if you went to see the property with someone else, get their perspective if you are unsure
2- Drafty windows are not uncommon in the area either, especially with older houses. Replacing that many windows can add up but from the pictures they look to be in pretty good condition so I think you would be able to leave them alone. Other options may be to restore/refinish the windows which I have a friend doing now and it works surprisingly well for old windows or there are also simple draft stoppers and shrink film that can be purchased relatively cheap from your local hardware store.
3- Boiler is a bit old but if it functions properly you may have a few more years left in it. Knowing the age of the boiler means you can budget for it going in and it won’t really be a surprise later.
4- Really interesting that it would have been unzoned…You could either calculate the heating into your numbers initially as one of the costs you pay as a landlord or you may be able to divide costs evenly over the tenants as long as you are clear with them that this is the case. I am not sure what the costs would be to separate everything back out but as you get into the house you could get a few estimates on what that would cost, and you may find that there is a good potential ROI there.

I looked at a lot of deals before I bought and I can say overall it looks great for the area. The first deal is mainly about learning, I can tell you that I have learned so much over the last few months and guarantee you will too. Super lucky that you found a 4-flat that beats the 1% rule in that area!

Thanks Chris - sounds like you're familiar with the struggle of finding properties that meet the 1% rule in the area. It's been months of analyzing, but that homework made it much easier to pull the trigger on an offer as quickly as I did here.

1 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

Originally posted by @Manuel Cordova:

Lee,

let me see if I can help. These are just my opinions on what I would do. Seepage - is it coming from the walls or from the ground? If from the walls that’s a different issue and would need you would need to get that tuckpointing done on the outside and inside. If coming from the ground. You may need to see if the water is draining into a sump pump. From the photos I can see it looks pretty clean. Windows - I would only worry about them if they are bad. Drafty you will always come across. I would look to repair or replace them if they are a hazard. From looking at the photos it is vacant. So this would be a good time to just go around and reseal if necessary. Boiler - if in fact it is that old. I would get quotes to replace if necessary. Look to try and see about condensing units that are more efficient. Either one or many depending on how you want to manage the heating. Remember these are rentals. You want to make things easy for yourself. So you don’t have to make frequent visits to maintain it outside of the normal visits. But you already know that as you are a PM. Let me know if that helps.

Super helpful, thank you!

0 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

Originally posted by @Dave Madoch:

Hi Lee

I wouldn't worry too much about the seepage especially if the inspector is just recommending tuckpointing. The inspector puts that in there to protect himself. They also need to find something wrong with the property.

The building looks like a beautiful first deal to have under contract. The rents look good and if they are under market value(I am not familiar with Elgin) the vacant units should be easy to start your leases with the market rent you should be getting.

Windows - I wouldn't replace until you need to.

Boiler - just get it serviced and you would be surprised how long they can last

I am with you, not very handy. I can paint a room if I wanted to but I generally find it best to outsource maintenance and repairs especially if you find the right contractors. If you are working with a good agent I am sure he/she would have contacts for you.

Congrats on your first deal! Welcome to the club!

Thanks Dave! I'm working with @John Warren and have been for the past 2 years. He is a wealth of knowledge when it comes to all aspects of real estate and he's been incredibly patient with me, which has been crucial leading up to this deal.

0 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

Originally posted by @Brian Detlefsen:

Lee,

I agree with what Manuel mentioned above. In addition, it looks like you have a drain in the floor of the basement. I doubt that you have a sump pump. If you do, then there were probably big water issues in the past and that was the solution at the time. It looks like all of your downspouts from your gutters drain right next to your foundation. Try to direct the water as far away from the building as possible.

The building is an old building (96 years), it appears that none of the windows will be a standard size. I wouldn't replace unless you have to. If this is in a historical district in Elgin, you will have a bigger problem replacing windows. In Elgin, I have seen people replace the windows with shorter windows and block out the gap with plywood. Not very good looking, but functional I guess.

You also don't have coin-op laundry. I'm sure the tenants have their friends over to do their laundry for free (at your expense). Plus, you can charge extra for garage space, weather it is to your tenant or not.

Lastly, you don't mention it in your post, but check the breaker box. If it has Federal Pacific Stab-Lok breakers, your insurance company will require that you replace everything ($$$). They are a fire hazard (don't ask me how I know this). There are/were a lot of these breakers in Elgin.

Funny you mention that - there are actually old Pacific Stab-Lok Breakers that are cut off. The previous owner installed brand new breakers for each unit + the common area. It looks great.

Do you know a good boiler tech in/around the Elgin area?

0 Reply

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

5y

Just to be clear on the heat, you can have zoned heat with a single boiler, each zone calls for heat when needed. I imagine the whole building was piped for that and then converted to a single zone and thermostat to control what it is set at maybe? You would have to have a plumber in to price returning to multiple zones. It says tenant paid heat, the reason for a single zone may relate to how tenant pays heat. Is it metered? RUBS?

Windows , any number of companies you can order custom sized replacement windows and there isn't a great upcharge for doing that. I would budget it in the next 10 years especially if you wind up paying heat (it doesn't list you do but you need to check into how its managed with one boiler). The other thing to look at would be do they have storms and if so do the tenants use them? A storm window can greatly improve heat retention but tenants have to put them down when winter comes.

Tuck pointing isn't a big deal. I don't think you will ever have a masonry house where the inspector doesn't site a need for tuck pointing. Just matters how much.

1 Reply

Mark F.Pro Member

Rental Property Investor · Elgin, IL · Member since 2016 · 326 posts · 270 votes

5y

@Lee Stephens I'm an investor in Elgin and saw that listing online and considered it as well, I think it's a great cash flowing property at $1150+ per unit. Honestly the only reason I didn't throw my hat in the ring on this one was because of needing to put down 25% down payment and I didn't want to tie up that much capital on one property. I never went to look at it but am VERY familiar with Elgin and there is nothing wrong with the area that it is in, in fact I own a SFR rental a block away and 2 unit about 2 blocks away. The building is also NOT in a historic district so no need to worry about that. The windows are old, as is the house and it is typical for them to be drafty, they will more then likely not be off the shelf windows however Menards lets you custom order JenWeld windows any size you need down to 1/8" increments with really no extra charge in case you decide to swap them out. I typically figure $300 a window for labor and materials for off the shelf (HD, Menards, Lowes) a normal size double hung windows, these are a little bigger but I think it can be done for $500 per window or less.

Nothing that you have listed in the inspection report causes me any concern at all, If there is anything I can help with let me know.

0 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

@Mark Faustrum Thanks Mark, this was super helpful. A cost of 300-500/window is considerably less than I was expecting which is relieving to hear. I’ll shoot you a request to connect!

1 Reply

Mark F.Pro Member

Rental Property Investor · Elgin, IL · Member since 2016 · 326 posts · 270 votes

5y

@Lee Stephens i literally just Friday picked up 10 of the 12 windows I need for a house we are doing in South Elgin right now, I just checked my receipts and it was $1618 w/tax out the door at HD. I usually figure $150 (3 hours labor) per window including trim work which is where I come up with the $300 per window average.

0 Reply

Lee Stephens

OP

Investor · Rosemont, IL · Member since 2018 · 49 posts · 15 votes

5y

@Mark Faustrum that is great to hear and thanks for the backup, Mark.

1 Reply

Travis Gulley

Contractor · Pueblo, CO · Member since 2018 · 11 posts · 10 votes

5y

@Lee Stephens. Hey Lee master plumber here. I can help a little with the boiler question. If it’s a good old fashion cast iron boiler they can last a very long time sometimes 50+ years. Might have to service and get parts changed but as long as the boiler itself is not leaking it should serve you just fine. And a side note I’m not a huge fan of high efficiency boilers they seem to be more of a headache and cost to maintain rather than a good cast iron boiler. As far as zoning goes, if you have baseboard in each unit you might take a peak in the the actual baseboard sometimes they will put zone valves in the actual baseboard instead of at the boiler. There are easier ways to turn a zoned system into a single use system such as unwiring and locking zone valves open instead of removing zone valves.

0 Reply

Brian Detlefsen

Elgin, IL · Member since 2016 · 20 posts · 7 votes

5y

@Lee Stephens Congrats on the deal, looks like a great opportunity. I have been bouncing around a little bit when it comes to boiler guys in the Elgin area. So many of them don't even return a phone call and the ones that do charge ridiculous amounts. If you find one that you're happy with let me know.

0 Reply

Jonathan KlemmBusiness Member

Moderator

Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

5y

@Lee Stephens - You already got a ton of good advice above and if other investors who have been in the game for a while like @Mark F. thought that was a good property, then it probably is. I'd definitely move forward and maybe try to negotiate the price down based on the advice from above.

Also, I was wondering what's your realtor telling you about the inspection? They should be your first source for advice....just curious.

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2 Reply

Ola Dantis

Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes

5y

One of our multifamily properties similar to this one was built in 1920.

I looked at your property and it was built in 1925, so with the 4 items on your inspection list, I think it is fair to say that you will have some items that will need repair or replacement.

Don't be scared about this, just be prepared! Register for Thumbtack (if you haven't heard of this app), it's basically where you can find local handymen to fix whatever issue comes up as issues will inevitably come up.

In terms of advising you to buy or not buy, I think that is a little difficult to do without any financials. That said, check this out I think it will help you: https://www.biggerpockets.com/...

What I would say to you so that think about how much this property can be giving you in 15 or 30 years when the mortgage is partially or completely paid off and all you are doing is receiving rent checks!

Real Estate Investing is such a long game!

0 Reply

Charito C.

Rental Property Investor · Los Angeles, CA · Member since 2021 · 3 posts · 1 vote

5y

@Lee Stephens

Now that you locked the place under contract and given the things that need fixing, can you ask for a significant haircut?

If the price is low enough, the numbers make sense, curious to see how this offer pans out...

Best of luck!

0 Reply

Home Inspection Results - NEED OPINIONS!

Home Inspection Results - NEED OPINIONS!

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