New to REI from far South-West Chicago Suburbs.

New to REI from far South-West Chicago Suburbs.

Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes

Hello all! Just getting started to REI late in life (well...late relative to my young teen-20's). Like many I've read about already, REI was something I never payed attention to throughout life other than thinking "other people did it" and it didn't hold an interest to me.

After catching a Clayton Morris podcast about 2 months ago and then reading Rich Dad Poor Dad, I've become hooked and driven to dive into this new adventure in life.

I've been in computers/IT/Technology since 1984, worked at a few companies, ran my own consulting business for 7 years and then re-joined the full time workforce for a client.  The small company I've worked at for 4 years was just acquired by a 700 person company out of Cincinnati and I'm not sure what the future will bring (they already have a very large well defined IT group so my niche isn't guaranteed long term).   Hitting the big 5-0 this past year, I don't know that I want to rely on the 18-hour days that I've spent the last 30 years putting in.  Technology is an always changing area so it keeps me very interested as a profession, a hobby, and 'fun time'.

However, since reading RD PD, I've found a new passion for something new to learn and I'm extremely interested in buy & hold investments.  Since I still work 10-18 hour days, I don't have a lot of free time to manage properties though (and all my skills are IT related...I'll take 5 trips to Home Depot for a home repair and STILL have to call in a professional to finish it.)

Obviously, a turnkey provider solution is what I'm looking into and have started conversations with a few of the fine folks I've found here on BP.  My plan is to acquire a property before the end of 2016 to get me started and learning the ropes.  We initially want to try and get something locally to get our feet wet.

My wife is skeptical but open after trying to explain the concepts to her. We're not planning on quitting our jobs any time soon. We're looking into REI for long term wealth and having something to pass onto our children someday..but planning on having our passive income to allow us more freedom.

The fun part is I bought a physical copy of Rich Dad Poor Dad and gave it to my 20yr old son, he read it in two days and is excited to start REI himself. He then gave it to our 17yr old son who's halfway through and already thinking differently. I'm keeping my eyes open for any opportunity that would let them pool a little of their savings together and maybe get started.

I live in Shorewood IL (just West of Joliet) and am lucky enough to work from my home office managing data centers in the Cincinnati OH area. With the new parent company being located in Cincinnati, I'll likely be travelling there more often (actually have a week long visit Oct 17-21 for company event.) I might also be interested in B&H in the Cinci area as I have a co-worker that lives there and has expressed an interest in REI as well.

I want to thank all those who have already posted SO much information here on BP for us newcomers and I am always open to learning new things.

Also, should anyone need/have any IT related questions, I'd be more than happy to offer my help in return (for over 15 years I've focused on supporting small businesses and their IT needs.)

I look forward to making many new friendships!

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Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
10y

@Andrew Hargreave,

One of the definitions of "being rich" is doing whatever you want whenever you want with who ever you want.

My W2 gig (IT, like you) evaporated this June. So, I'm full-time now.

Now, it's time to learn about trading money for time like "rich" people do instead of trading time for money like W2's do ... making money work for you like "rich" people do, instead of you working for money like W2's do ... and multiplying yourself by hiring others like "rich" people do. Build on your strengths, hire out your weaknesses.

I have a spine injury. So, I'll hire people to do demolition and clean up, and "buy my time back" (and protect what mobility I have left).

I've never been good at building things with wood. So, Ill hire carpenters and "buy my time back".

I'm a former HVAC guy - I can solder pipes, hard and soft solder, but no good at sheet metal. So, I'll hire plumbers and HVAC people to get the advantages of their skill and experience and "buy my time back".

I can design circuits and  pull wire, but not much good at bending conduit. So, I'll hire electricians to get the advantages of their skill and experience and "buy my time back".

I can do a fair job of painting, but I'll hire painters to get the advantages of their skill and experience and "buy my time back".

I can always get more money ... do a deal, sell stuff off, lend money out and collect interest, add income property to my portfolio, whatever.

Get more Time? Not so much.

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  • Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    10y

    @Andrew Hargreave

    Welcome to Bigger Pockets.

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Andrew Hargreave,

    One of the definitions of "being rich" is doing whatever you want whenever you want with who ever you want.

    My W2 gig (IT, like you) evaporated this June. So, I'm full-time now.

    Now, it's time to learn about trading money for time like "rich" people do instead of trading time for money like W2's do ... making money work for you like "rich" people do, instead of you working for money like W2's do ... and multiplying yourself by hiring others like "rich" people do. Build on your strengths, hire out your weaknesses.

    I have a spine injury. So, I'll hire people to do demolition and clean up, and "buy my time back" (and protect what mobility I have left).

    I've never been good at building things with wood. So, Ill hire carpenters and "buy my time back".

    I'm a former HVAC guy - I can solder pipes, hard and soft solder, but no good at sheet metal. So, I'll hire plumbers and HVAC people to get the advantages of their skill and experience and "buy my time back".

    I can design circuits and  pull wire, but not much good at bending conduit. So, I'll hire electricians to get the advantages of their skill and experience and "buy my time back".

    I can do a fair job of painting, but I'll hire painters to get the advantages of their skill and experience and "buy my time back".

    I can always get more money ... do a deal, sell stuff off, lend money out and collect interest, add income property to my portfolio, whatever.

    Get more Time? Not so much.

  • Rental Property Investor · Rio Rancho, NM · Member since 2013 · 314 posts · 816 votes
    10y

    @Andrew Hargreave

    Welcome to BP and best of luck to you! Since you're going to be looking at turnkey properties, make sure you familiarize yourself with how these sellers and the purchasing process works.

    My biggest pet-peeve with turnkey rentals is to always run your own numbers instead of relying on the cash flow projections you find on their websites. Many times they are inaccurate or inflated. Here is a post I wrote on here not too long ago that goes into more details.

  • Chicago, IL · Member since 2016 · 9 posts · 0 votes
    10y

    Andrew, great to meet you.  Awesome write-up.  I'm also new to the real estate game and want to learn the process.  I'm also thinking that a turnkey solution might be my first investment.  Keep in touch how things go for you.  Have you isolated a Turnkey firm that you are looking to work with?

    Patrick

  • Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes
    10y

    @Anton Ivanov

    Thanks for the advice..I did read your post the other day.  I've been doing research and running numbers using the calculators here on BP when I've either found a property or had it sent to me by a TK provider.  Like you suggested, once I did some digging, they weren't quite as impressive as they were upon first glance.

    @Patrick Everett

    Welcome as well!  At the moment, I'm looking at GC Realty out of Bartlett.  I've spoken with Bryan and am very impressed so far.  We're going to actually meet in person and he's going to take my wife and I and show us their properties on the South side so we can see all the phases.  I really like their approach so far and they're not rushing/pushing us to move quickly.  They want us to succeed as well.

    I'm also looking for local RE attorney's and RE CPA's to make sure everything is setup correctly so I'm researching that line as well as getting the financial side setup (HELOC on primary residence so we can make the down payment quickly when we find the right deal) and shopping around for good lenders that we can use for the actual backing on the deal.

    Lastly, I'm in sticker shock from the umbrella insurance quote I got from our State Farm rep (we've had everything...home/5 cars/son's renters) under SF for over 30 years...the $1m policy is over $1100 per year additional to what we already have.

  • Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
    10y

    welcome to bp Andrew.

    If you need a referral for insurance or a good attorney, pm me. I'm pretty happy with my policies including the umbrella policy.

    Always shop around for insurance. Unfortunately, I don't think most of them reward loyalty. 

    I also have a relationship with a banker of a small bank that can help you with heloc as well. 

    Good luck in your search for a tk property. 

  • Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes
    10y

    @David Dachtera, I agree.  Being a solo consultant for over 7 years, I always tend to think in terms of  time spent.....as in "I could spend 2 hours figuring this out myself or I could call in a professional to fix it for $175 while I spend those 2 hours billing a client $150/hr (iow, come out ahead).  Drives my wife nuts since her dad has always been a do-it-yourselfer and doesn't understand my mentality.  My father taught me to bring in the right person for the job from the beginning (he ran his own soft drink distributorship for 30yrs) and everyone comes out ahead.

    Even when it comes to IT, I have no problems hiring a professional with more experience in a technology to get me started while I learn to manage it going forward and take it over.

    I'm addicted to always learning something new.  I can't imagine a job where I do the same thing day in and day out.  When my W2 jobs got to that point, I would be trying new things in my off hours and building out my skillset (aka toolbox) and used that to either help my employer..or lend my time to non-profit organizations who couldn't afford someone to do it.  I host websites for churches, private montessori schools, the high school choir, etc.  

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    10y

    Welcome aboard @Andrew Hargreave

  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    10y

    @Andrew Hargreave Welcome to BP! Sounds like you've already made a good first step by identifying the type of REI that will work for you and your family right now. Of course, as a turnkey provider, I am biased toward the niche, but @Anton Ivanov makes some very valid points about the industry - you really do need to put in your own legwork to ensure the numbers add up and you know exactly what you are buying.

    I've written about this a number of times, so here is a link to a post I wrote recently about the basic questions any new investor should be asking of any turnkey provider they consider: https://www.biggerpockets.com/forums/55/topics/361...

    While turnkey is often touted by providers as the 'easiest' REI niche, there is still a lot of work to be done long before you pull the trigger on a property, so do yourself a favor and really dig into the due diligence phase to avoid getting caught up in the excitement and "must act now!" mentality a lot of podcasts and 'providers' try to sell. In the long run, you'll be glad you took your time.

    Best of luck in your new endeavor, and feel free to reach out if you have any questions about turnkey or the Birmingham market.

    Clayton

  • Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes
    10y

    @Clayton Mobley Thanks! I actually saved your list yesterday to my REI Evernote notebook of tips/lists to go through on each deal. Thanks for making the list for us!

    This is exactly why I don't want to start out with out-of-state REI, I want something somewhat local that I can put eyes on easily. The properties that GC Realty will be showing us are in Chicago which is still a 45 minute drive..but that's much easier than a 4 to 6 hour drive away. Hopefully by our 3rd or 4th door we'll be more comfortable with the process and will be ready to spread our inventory between multiple locations so a ding in a local region might be covered by a diverse portfolio.

  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    10y

    @Andrew Hargreave Good plan!

    Another major point I make to new investors is to have a little heart-to-heart (either with a spouse or just internally) about what you require of an investment besides ROI. Typically this revolves around time, risk, and control, aka: debt, involvement, and...well, control. New investors often have a big psychological problem with taking on debt via mortgages (even if your tenants will be paying it down), so being honest about risk tolerance is huge. Same with time/energy - not everyone can be or wants to be super involved with rehab, management, etc so certain REI strategies will be more or less suitable. And as for control, being able to see the property regularly or be involved with tenant selection feels like a bit of a security blanket for many people in the beginning, and if you don't feel secure in your investment, you won't enjoy the process. Others just want to cut a check and let someone else handle it, it's all a matter of preference.

    Sounds like you've already done a lot of your own introspection on these points, which puts you miles ahead of many. If you know you won't feel comfortable owning out-of-state just yet, then trust your gut and find something closer to home. Your answers on all of the above issues will change over time, and you can adjust your REI strategy if and when your goals and needs change.

    Glad my post was helpful and I appreciate the feedback!

    Best,

    Clayton

  • Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes
    9y

    Following up:

    We closed on our first turnkey buy & hold property last week!  We worked with Mark Ainley at GC Realty and we managed to go from tour of their various properties to offer to closing in 4 weeks (something my attorney told me was impossible in IL but I still managed to push it through).  Nice 2BR/1bath with a full finished basement (3rd BR in basement) on the South side of Chicago (decent neighborhood..not war zone).  Tenants has just signed a lease and moved in early December.  GCR did a tear-down rehab and completely new roof and kitchen/bathroom work and hardwood flooring throughout.

    The Cash on Cash ROI is 14.53% and will cash flow around $340/month after all expenses. Of course the new Chicago property tax hike and water/sewer hikes that hit in January will bite into that a bit.

  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    9y

    @Andrew Hargreave Congrats on a successful investment! That new roof and flooring will go a long way to keeping CapEx down. I know Chicago tax rates are some of the highest around, but it sounds like the flow is enough to account for that - I hope it all goes well for years to come!

  • Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    9y
    Originally posted by @Clayton Mobley:

    @Andrew Hargreave Congrats on a successful investment! That new roof and flooring will go a long way to keeping CapEx down. I know Chicago tax rates are some of the highest around, but it sounds like the flow is enough to account for that - I hope it all goes well for years to come! 

     Chicago property tax rates are actually very low relative to comparable cities.  

  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    9y

    @Jeff Burdick Of course, you likely have more experience with Chicago taxes than I do! From what I've read, you're correct that other big cities like New York have comparable rates, but Chicago (and IL in general) still have some of the higher rates in the nation. 

    Amazingly, I think I recall that Cook County's rates are actually below the average for IL in general - do you find this to be true? In AL, property taxes are some of the lowest in the nation - so honestly any time I see anything above 1% of assessed (so, 10% of ACV) it gives me heart palpitations.  Of course, there are pros and cons to super low tax rates depending on who you ask - but I don't know any RE investors complaining ;) 

    In the end, it doesn't much matter what tax rate you have - if your property is generating enough income to compensate (with decent positive cash flow) and doesn't create a lot of headache, then it's a successful investment.

  • Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    9y
    Originally posted by @Clayton Mobley:

    @Jeff Burdick Of course, you likely have more experience with Chicago taxes than I do! From what I've read, you're correct that other big cities like New York have comparable rates, but Chicago (and IL in general) still have some of the higher rates in the nation. 

    Amazingly, I think I recall that Cook County's rates are actually below the average for IL in general - do you find this to be true? In AL, property taxes are some of the lowest in the nation - so honestly any time I see anything above 1% of assessed (so, 10% of ACV) it gives me heart palpitations.  Of course, there are pros and cons to super low tax rates depending on who you ask - but I don't know any RE investors complaining ;) 

    In the end, it doesn't much matter what tax rate you have - if your property is generating enough income to compensate (with decent positive cash flow) and doesn't create a lot of headache, then it's a successful investment.

     I'm not an expert on NYC taxes, but to my knowledge, Chicago's are significantly less than those of NYC, Boston, SF, Seattle, etc.  Chicago's are also significantly less than many Chicago suburbs.  I pay $4800 for a property worth about 430K, for example.  I don't consider that to be outrageous at all.  

  • Rental Property Investor · Shorewood, IL · Member since 2016 · 80 posts · 46 votes
    9y

    I'm out in the far West Chicago suburbs and pay just under $8k for a $240k house.

  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    9y

    @Jeff Burdick @Andrew Hargreave wow, what a difference! I'm no expert on out-of-state rates either, of course. And everything depends on your school district and other special districts - making certain specific areas pricier than others (maybe that's the situation with Chicago vs the suburbs?). But just using the tax rate calculator on SmartAsset, it looks like Seattle has a rate about what Jeff's quoting for a prop of the same value, while NYC's is more than double. In Birmingham, a prop with that price tag ($430k) would be in a very A neighborhood, but taxes would come in at around $2,800. 

    https://smartasset.com/taxes/alabama-property-tax-..

    Again, in the end, I don't think taxes should be the primary concern in an RE investment. Tax rates are just one of the many things differentiating markets and everyone prioritizes things differently. They are important, but if your margins are so narrow that your tax district is the thing holding you back, you should be looking for a new investment anyway. I'm glad to hear you both have successful investments in markets that are treating you well!

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