New member from Chicago

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New member from Chicago

Mike B.
IL · Member since 2012 · 29 posts · 9 votes

Hi everyone,

I probably should've browsed the forums a little more before introducing myself, but I have zero knowledge about real estate and I'm experiencing information overload trying to find answers to my questions. I've been reading BP for a few hours and it seems like there is a ton of great information here as well as a lot of friendly and helpful members.

A little about me: I have a background in residential construction and I always found the idea of rehabbing SFH's appealing. I'm currently renting an apartment and am hoping to become a first time home buyer very soon. So I found BP to try to educate myself before diving in to the biggest financial decision of my life.

I was able to get a small loan from a friend at 4% interest, so for the last two weeks I've had a real estate agent that my sister recommended send me MLS listings. Unfortunately I've only looked at one property. It's a 2/1 quad, REO, and the asking price is $57K. The ARV is $80K and it needs $6K in repairs. I'd be doing all the rehab work myself. So compared to burning my money every month renting, this seems like a pretty good starter home for a first time buyer. If I get it my plan is to rehab it and live there and then rent it out and repeat the process or maybe try to sell it if I can get a high enough offer.

I have some questions before making an offer that I hope you guys can help me with:

1. How much less should I offer because I'm paying cash as opposed to financing? I know a cash offer is more appealing to the bank, but I'm not sure how much more valuable it is to them.

2. Do I need a real estate attorney or can I use a title company? Maybe this is something my real estate agent will have recommended for me, or I should shop around for the best price?

3. When do I look for homeowner's insurance? My auto insurer is a small company that gets me a great rate, so maybe I should start with them to see if I can get a discount? And if I can choose a larger deductible to get a lower rate, should I do so?

4. Sometimes I'll see a foreclosure on zillow and it will say it's been on zillow for 30 days or whatever and to go to a paid site for details like foreclosure.com. How can I get the details for free? And when I find out what bank owns the property should I have my realtor contact them or try to buy it from them directly?

I plan on spending a lot of time here on BP, and hopefully soon I'll be able to contribute to this great site! Thanks for reading!

Mike

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Scott W.
Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
14y

There's a million foresclosure opportunities out there; everything is a deal right now; you're just going for the ultimate super deal (which isn't a bad thing)!

hang in there - you'll find something; tons of opportunities.

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  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    14y

    Welcome. I'm from Illinois and invest in the south suburbs (actually just south of the south suburbs - Will and Kankakee counites). What area are you looking for?

    re: offer
    I'd keep looking. If you're looking at stuff that will appraise out at 80k, you should be able to get a much bigger discount than that here in Chi-town. If you are going to put in an offer on a house thats only going to be worth 80k and needs 6k, I'd say 46k-48k tops for your offer. That keeps you under 70% LTV.

    But be sure your estimated value is on the money. There aren't many houses in that price range that aren't in some pretty down markets right now so I would definitely get that confirmed with some comps.

    I'd try the HUD site, homepath, and realtor.com.

    re: attorney
    If its a bank owned, I wouldn't bother with an attorney. You're going to have no other choice than to use their contract. I'm not sure what a 2/1 quad is - a townhome unit maybe? If there's an HOA, you might want an attorney to go through the fine print.
    i.e. Can you rent it later on it if you want?

    Definitely go through a title company.

    re: insurance
    You need to have insurance in place before you close so
    that its paid for and starts on the day you close. Technically,
    if you're paying all cash, you don't have to have insurance.

    But if you leave the closing the place catches on fire, you're
    out all the money. Get the insurance. For $80k house, it'll probably only cost you about $500.

    re: bank owning
    Your realtor can't go directly to the bank. The bank will have a listing agent for all their REO properties (houses they own thru foreclosing). Just stick with MLS and you'll find a steal.

    Give me an idea of what area you're looking for and what type of home/unit and budget and I'll see if I can do some looking. I love finding deals - even if its for other people. :-)

    Shoot me a quick email

    0Reply
  • Mike B.
    OP
    IL · Member since 2012 · 29 posts · 9 votes
    14y

    Hey Mike, thanks for the welcome and helping with my questions. I'm looking in Cook, Dupage, and Kane counties.

    That property sold yesterday. I forgot to say I wasn't going to go higher than $50K for it. And before I meant it was a 2bed/1ba townhome unit.

    I'll be sure to check out those sites, thanks!

    0Reply
  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    14y

    Dupage is a little tough to make the numbers work for rentals. I work in that area and keep an eye out but its a little too far from home me. Just not sure anything there fits the profit model you'd like to have. Some very pricey towns (naperville, warrenville, lisle, etc). I don't think much ever sells under 100k there. Although every once in awhile, I'll see some stuff in west chicago that might work.

    Kane has aurora and elgin and there are tons of rentals available there.

    Cook - I'm assuming western suburbs only, is also a bit tricky for the area I'm guessing you're looking in. I'd be very hesitant to touch Cook county though because of the landlord laws that are so one-sided in favor of tenants there. 5 months for an eviction! I'd run, not walk, from doing rentals there (although I have some there now from my earlier purchases, none in the last couple of years and won't be buying any more there either).

    Not to mention cook county has all kinds of budget problems and they're talking about some hefty property tax increases to help out - and the taxes are already crazy there.

    I'm paying about $5,500 on a house assessed at 135k there.
    Its just out of control.

    0Reply
  • Account Closed
    Wholesaler · Chicago, IL · Member since 2011 · 219 posts · 38 votes
    14y

    Hey Mike B., welcome to BP. Great to see another Chicago investor on the site!

    0Reply
  • Scott W.
    Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    14y

    cook county is high for property taxes? my taxes, for a rental, have been lowered $100 each of the last 3 years. i now pay $1200/year on a condo I rent out in hanover park. current value is probably around $65k.

    0Reply
  • Eric M.
    Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
    14y

    Cook county is known for its low property taxes relative to DuPage, though if you looked at my personal home taxes, you wouldn't say that! :-)

    All I can say is that as a newbie the rule is that your Rehab costs are always going to be underestimated and the ARV is always overestimated so be careful on a tight one like that. If those are the Realtors numbers, never trust them.

    And don't forget to account for selling costs. Those can sneak up on you.

    Don't be obsessed with finding free data sources. That is penny wise and pound foolish. There is no free service that is good enough to base a real money decision on. If you are interested in foreclosures, pay for a legit foreclosure data service like ILFLS. Foreclosure.com is horrible.

    You don't necessarily need an attorney for every REO deal you buy but you will need one and you will want one, so get one.

    0Reply
  • Ramon Jenkins
    Real Estate Agent · Milwaukee County, WI · Member since 2009 · 3k+ posts · 525 votes
    14y

    Welcome ,,

    per Mr Williamson statement

    Lake county property taxes our also extremely high

    FYI ,, you could hire a property tax advisor who
    would attempt to lower the property taxes

    Illinois -
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    If interested in reducing property taxes
    send me a PM and I would send over a property tax advisor
    recommended information only
    I have no affiliation ( meaning I receive no $ )
    I hired a property tax advisor - once
    for a Round Lake Beach property ,, fyi

    FYI - he / she typically receives a onetime fee
    ( 40 - 50 % of your actual savings )

    Example
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    individual saved us $1200 in return we paid $600 within 30 days
    no savings = no fee

    0Reply
  • Mike B.
    OP
    IL · Member since 2012 · 29 posts · 9 votes
    14y

    Thanks guys, I really appreciate all the advice.

    To update, I'm getting a little discouraged because I can't seem to get an offer accepted (out of 7 offers only) or even a counter offer from the banks. I'm not sure if people are overpaying for the ones I'm bidding on or if I'm making mistakes estimating ARV, or trying to make too much profit.

    Most of my offers are in multiple bid situations and I haven't been able to win one yet. The last REO I bid on I was a 3bd/1.5ba ranch with a list price of $56K. I found 12 good comps for it and came up with an ARV of $109K. It needed a ton of work, but nothing major that I couldn't do myself. I estimated rehab costs of $23K, not including unforeseen costs. So I had my RE agent offer $65K cash and no inspection contingency. Seem reasonable? In retrospect I'm thinking that I should've offered $6,500 EM instead of $1K, and also maybe I should've not used my RE agent and gone directly to the listing agent. This learning curve is getting expensive lol.

    I just get paranoid that I'm making bad mistakes when I offer 15% over list price, cash, and no inspection, and still don't get accepted. I'm thinking that maybe some of my competitors have strong relationships with the listing agents and asset managers and will always be able to win these multiple bid situations unless I'm willing to overpay. But it's still very early in the game I guess.

    0Reply
  • Scott W.
    Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    14y

    There's a million foresclosure opportunities out there; everything is a deal right now; you're just going for the ultimate super deal (which isn't a bad thing)!

    hang in there - you'll find something; tons of opportunities.

    1Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    14y

    Mike B.,

    Welcome to the forum here.

    In regards to property taxes. Lake is expensive although I tend to stay here as it is local for me.

    Appealing your property taxes is very easy. You typically do not need to hire someone to handle it for you. You should simply bring your HUD statement to your assessor and they should have no problem in adjusting it to your purchase price.

    This is how I lower my assessed values on new purchases. For others, I simply pull up comps. I would be happy to provide assistance to anyone for Lake County properties as I know the system quite well.

    In regards to attorneys: CYA. Cover your *$$

    Eric Michaels, Your statement about Penny Wise and Pound Foolish is very correct. As is the statement on underestimating repairs.

    -Steven the Tax Guy

    Your guide to IRS laws, rules and regulations.

    [email protected]224-381-2660
    1Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    14y

    Jenkins Ramon,

    That is extremely expensive and seems rather cost prohibitive to me when you can typically do it yourself.

    I know some people in the assessor's office for Avon township.

    Mike B., Don't get discouraged. It can take many offers in some cases. I do truly hate saying it; however, in this market, many agents are getting VERY greedy and this is a topic that bothers me incredibly. Many would rather be on both sides of the deal to make more money than to just get it sold.

    I do hope you have not had any cost other than mileage in looking at properties.

    -Steven the Tax Guy

    [email protected]224-381-2660
    0Reply
  • Ramon Jenkins
    Real Estate Agent · Milwaukee County, WI · Member since 2009 · 3k+ posts · 525 votes
    14y

    Steven Hamilton II

    “I would be happy to provide assistance to anyone for
    Lake County properties as I know the system quite well. “

    I will definitely keep this in mind
    [ penny saved is a penny earned ]

    0Reply
  • Drew Heilig
    Antioch, IL · Member since 2012 · 6 posts · 0 votes
    14y

    @Mike B., or anyone willing to answer: if using a realtor to make offers on properties, do you find that it takes a certain type to be willing to write so many offers for you? In other words, how willing is the typical realtor going to be to make multiple low-ball offers on distressed properties on your behalf?

    I've been looking at select properties in my area for a possible buy and hold situation for rental. I called a realtor I used in the past to sell my primary residence, but I get the sense that she's not the type to use for an investment hunt.

    And I am a Lake County future investor as well, so I guess I'll piggy back the introduction.

    Thanks for any replies.

    0Reply
  • Account Closed
    Wholesaler · Chicago, IL · Member since 2011 · 219 posts · 38 votes
    14y
    Originally posted by Scott Williamson:
    There's a million foresclosure opportunities out there; everything is a deal right now; you're just going for the ultimate super deal (which isn't a bad thing)!

    hang in there - you'll find something; tons of opportunities.

    Very true Scott. I don't know if I would say that everything is a deal but there are definitely tons of foreclosures out there.

    0Reply
  • Mike B.
    OP
    IL · Member since 2012 · 29 posts · 9 votes
    14y

    Drew Heilig I'm glad you asked this question because it's something I have been wondering about myself. I feel like as a newbie looking for a steal I must be my RE agent's worst nightmare. My RE agent has already written 7 offers for me, used a ton of time and gas to show me 15 different cheap dumps, answered a bunch of my dumb questions, and he hasn't earned a dime. He's been very nice the whole time and hasn't complained once. He's known from the start that I'm a clueless first time home buyer and that I'm looking for a cheap house to rehab, but I still feel bad for the guy.

    My advice would just be to communicate up front what your intentions are and make it clear that you're an investor so the RE agent will have a good idea of what kind of client they are taking on. I hope someone will correct me if I'm wrong but maybe making it clear what kind of expectations you have to the agent can save a lot of time and prevent future resentment.

    0Reply
  • Steven Hamilton IIPro Member
    Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
    14y

    Blunt statement:

    Here is the thing. Depending upon your definition of low-ball offer. Which I've seen enough in my day to make me crazy. You should not necessarily be making low-ball offers all the time. Your offers should still be reasonable. A low-ball offer Occasionally yes; however, that is why 99% of your offers will be rejected. That means if you wrote 100 contracts and it took 1 hour of each of your and the realtor's time (Driving to meet, writing up the contract, sending the contract back and forth and making sure that it is received). Now think that a typical work week is 40 hours; however, we all know self-employed individuals work well more than that, but for the same of comparison, I"ll use 50 hours per week. That is two weeks of work for one hour that actually brings in an income. And I'll use an example of a property, I'll pretend it is one in my area listed about 50k, but you offered 40k.

    I'm not an agent, but I can tell you from the position of being the son of an agent it was always inconvenient.

    That agent will generate 2.5% ($1,000) on that transaction if it actually closes. That realtor then has their business expenses for those two weeks. That is 500 per week. If that is all they did they would generate a measly 26k per year before expenses (500 * 52). I'm sorry when I say that I don't want to have to work at all hours of the day and away from my family for a pittance. I'm not a realtor, but I can tell you about many of the ones I have met and worked with. I heard a suggestion the other day from an attorney in regards to a property's unpaid water bill: "Just pay it from the selling agent's commission". Most agent's don't get any respect. Phone calls even after 9PM.

    Offering 50% of the listing price will do not but irritate your agent.

    So how would you like to work for 500 per week before expenses?

    As Mike B. said you should be upfront about your situation. In some cases. I have seen some agents who will write up low-ball offers for you all day long for a small fee.

    -Steven the Tax Guy

    Your guide to IRS laws, rules and regulations.

    [email protected]224-381-2660
    0Reply
  • Drew Heilig
    Antioch, IL · Member since 2012 · 6 posts · 0 votes
    14y

    Thanks for your reply Steven, that's what I was getting at--I don't want to waste someone's time for a measly commission. But, at the same time, I was wondering if there might be a certain type of realtor that specializes in taking on investor clients...my old realtor is certainly not one of those. I was up front with her about my intentions, but after seeing what's available I am thinking writing multiple offers in hopes that one eventually sticks is the only real way to generate profitable investments in this area.

    0Reply
  • Account Closed
    Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
    14y

    Wow - great thread. Tons of awesome information and advice. Here is the thing about starting out.

    #1 - Have a burning desire;
    It seems you have that. Keep asking questions, keep digging!

    #2 - As you make offers, and view properties, you will be better and eliminating the areas that are a waste. You should be able to tell from the listing, the photos, etc what is not worth it. So as you progress the time you spend viewing crap is reduced.

    #3- As you progress you will find your true niche. Each person has a different interest area in real estate. You will also find out your true skill. Once you find what you do best, attempt to outsource all the rest.

    #4 - Consider teaming up with more experienced people. Either offer your services/time up, maybe hire a coach. This isn't a must, however it does help.

    #5 - NEVER ever quit!

    Great to network with all the other Chicago Investors.. This is awesome.

    1Reply
  • Account Closed
    Wholesaler · Chicago, IL · Member since 2011 · 219 posts · 38 votes
    14y
    Originally posted by Drew Heilig:
    Thanks for your reply Steven, that's what I was getting at--I don't want to waste someone's time for a measly commission. But, at the same time, I was wondering if there might be a certain type of realtor that specializes in taking on investor clients...my old realtor is certainly not one of those. I was up front with her about my intentions, but after seeing what's available I am thinking writing multiple offers in hopes that one eventually sticks is the only real way to generate profitable investments in this area.

    You definitely want to work with a realtor who specifically deals with other investors on a weekly basis. In fact, that is one of the first questions you should ask them when trying to find a realtor to work with. That realtor will know how the wholesaling game is played and will be a great resource to you.

    0Reply
  • Account Closed
    Wholesaler · Chicago, IL · Member since 2011 · 219 posts · 38 votes
    14y

    And also, great input ***********!

    0Reply
  • Mark Pollard
    Real Estate Investor · Chicago, IL · Member since 2011 · 5 posts · 3 votes
    14y

    Welcome to BP Mike. It sounds like you are doing a good job of learning as much as you can. Best of luck to you

    -Mark

    0Reply
  • Account Closed
    Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
    14y

    Thanks Kevin Tunney! Much appreciated.

    1Reply
  • Mike B.
    OP
    IL · Member since 2012 · 29 posts · 9 votes
    14y

    Yeah ***********, this thread has turned out to be filled with tons of great info. Thanks for your contribution!

    Update:

    I finally got an offer accepted...I think. I made an offer on a bank owned SFH listed at $70K. I offered $60K, cash, $6K EM, no inspection, 2 weeks to close. The bank countered within 48 hours for $67K, $1K EM, close in 30 days. My RE agent said he didn't think there was any more room for negotiation and I should take or leave their counter. So, I reluctantly accepted.

    I told my RE agent that I didn't want to use a RE attorney because I'm paying cash and there's no HOA because it's a SFH. He said that he advises me to use one because,

    [b]"They would be the ones to prepare the HUD1, take care of title insurance, etc. That is a part of this I cannot do. You really should have legal advice to make sure it is done right.

    They told me it would be 5-7 days before the bank forwarded the amendments. Until we sign those, there is no executed contract. That's another thing an attorney would do for you...make certain there isn't some back-end way you could either lose the deal and earnest money, or find later there are liens that haven't been taken care of."[/b]

    I'm not sure what to make of this. Is it really that complicated? I thought that I just needed to show up with my favorite pen and now I'm hearing I need to prepare a HUD1? And the title may have liens on it? Doesn't the seller have to provide a clear title?

    My RE agent picked an attorney for me without asking me if I wanted to use one or if I had my own, so I don't know if he wants me to use one because it's a friend or family member of his, or if I'm truly in over my head and can't close on my own.

    I'm more than willing to do my homework so I can save on attorney costs, so if anyone has any info or links to articles for how to close without an attorney I'd greatly appreciate it. Thanks!

    1Reply
  • Account Closed
    Wholesaler · Chicago, IL · Member since 2011 · 219 posts · 38 votes
    14y

    Mike B. congrats!

    I believe you may use an attorney to assist you in the transaction but Illinois requires a title company to close the transaction. They do not require an atttorney to close the transaction like some other states do. If you want a more objective opinion on the purchase, an attorney would be able to give that to you.

    0Reply
  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    14y

    Here's the thing. If you were buying from an individual, I'd strongly suggest you get an attorney. But buying from a bank or a govt agency, I don't see the need.

    You're not getting the banks or govt agencies to change a single thing in their contract. And, as for liens, thats what the title company is for. They won't close a deal if there are outstanding liens on the property.

    As long as you're going through a title company closing and have title insurance, an attorney probably isn't needed unless you're looking to get out of the deal. Then I'd talk with an attorney.

    1Reply
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