Chicago - Roscoe Village 4 unit BRRR! Deal Diary

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

8y

Thanks Syed just sent you a connection request. The title company filed for a new certificate of zoning compliance and we had it about a week later.

Kerry Mertz

Appraiser · Easton, CT · Member since 2015 · 94 posts · 98 votes

8y

Following. I'm looking to invest in the Chicago market and I'm interested in how this turns out.

John CasmonPro Member

Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes

8y

@Henry Lazerow That's great. It's a great area and I'm sure the finished product will be a beauty. How difficult was the rezoning process? I was told to not even bother on another deal I did.

Also, what's your rehab timeline?

Ashour Rehana

Real Estate Broker · Chicago, IL · Member since 2016 · 57 posts · 23 votes

8y

Henry Lazerow where was the property located in reference to Lathrope? I was asking because I have 3 lots around the corner from Lathrope.

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

8y

@John Casmon

Due to the age and being grandfathered in it was actually pretty quick change to the zoning doc to show that it was legal 4. Pretty simple process most any title company can order a new zoning doc made for you. Not like trying to change the actual zoning of the area which would be a much longer process.

Dennis Montai

Oak Park, IL · Member since 2017 · 3 posts · 1 vote

8y

Yep this sounds like a simple rezoning (at least in terms of rezoning work..). Really curious to see more pics of the place if you don't mind.

The hardwood floors already look amazing in that one picture. Neighborhood is great and appreciating fast, but obviously there was a pretty high capital investment on this... 20% of 730 + what ever your lost rent is while renovating. Can you give any more of the financial breakdown on this? I'm way too worried to go into these nice/high price areas.

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

8y

Originally posted by @Henry Lazerow:

I was the Broker representing the buyers side. Happy to walk my Biggerpockets friends through the before and after!

3 units + 3 story coach house (was 2 units we are converting into 1 luxury 4br 2ba). Bought for $730,000 within 72 hours of list in MLS. Multiple offer situation (later learned ours was not the highest) we got the deal by offering high earnest money 25k and 75k providing a strong offer. Property ended up appraising 20k over! We are also hoping that the new Lathrop Homes redevelopment of the old housing projects nearby appreciates this area even more.

Project plan: Value add to the 3 units + Coach House through a rehab. We are putting roughly $40k into each unit which includes new floors, kitchens, updating bathrooms and moving a few walls to open the units up into a more modern layout. The units came in good shape and passed the inspection with no major issues but were cosmetically outdated and as you can see full of junk, fun cleanup :) Our goal is to create gross rents of $8550 per a month or $102,600 annually. We will then either sell the property at a mid 6 cap or refinance out of the construction loan and hold long term. We are very bullish on this area and have prior experience in the direct neighborhood.

Road bumps: Had the property rezoned to certify legal 3 units+legal 4th unit coach house which delayed the close for several weeks.

Construction is set to commence at the beginning of December. Will be posting some after construction shots next ;)

Hey Henry, your project looks awesome. I'm doing a fairly similar project up in Edgewater! We're a few weeks away from being complete now! I'd love it if you could provide updates as your project continues.

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

8y

Will do man!

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

8y

In progress

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

8y

Rehab finished......

Garden:

Floor 2

Coach House - Huge Master

3 Reply

PJ Kolnik

Chicago, IL · Member since 2017 · 81 posts · 87 votes

8y

I’m a big fan of leaving the old oak features and incorporating the new white a grey color scheme.

Joe MendePro Member

Rental Property Investor · Chicago, IL · Member since 2016 · 67 posts · 12 votes

8y

Your place looks great! Best of luck to you!!

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

7y

JUST CLOSED! My biggest deal yet $2,393,500. Took the project a differant direction and decided to flip the properties. I found a buyer pre-market doing a 1031 exchange and created an 8 unit package deal with another rehabbed 4 unit in the west lake view area. This property sold for $1,173,500 and the other 4 unit sold $1,220,000 with simultaneous closes.

To help sum up the project a bit and factors I think led to it’s success.

1) Buying the property cheap. 730k for a 4 unit in west lake view was amazing. This was achieved through extremely aggressive negotiating basically demanding them to take the offer right then and there on phone rather than call best and highest and then following up a bunch to get it back actually signed. MLS listing.
2) Doing high end kitchens/quartz bathrooms but not going overboard elsewhere. For example, refinishing floors vs new floors and not doing a full gut. We left the layout (other then coach house) exactly the same as before.
3) Going on the outskirts of class A areas (these were both a little West of Ashland). For example, further east this deal wouldn’t of worked as well due to land value being so high on the initial purchase but go a little West and as-is properties are way cheaper. The finished product sells based on the cashflows it now produces as long as still class A- it will sell for top dollar once rehabbed/stabilized. This was a similar strategy we did for @Brian N. recent purchase buying just West of Western Ave. on the outskirts of expensive Logan Square and Wicker Park neighborhoods. Also if doing a refinance this works great as they will pull some of the comps from the more expensive areas next door.
4) We rented these up for top dollar. The 2br 1ba’s we got $2000 and $2125 and the garden 1br $1600. I opened the listings up to my brokerages leasing team where I make very little commission off the rentals this way but everyone pushes it on craigslist, personal social media, etc. Definitely a team effort.
5) This is I think the most important. Finding a way of adding real value. For this project it was done by taking a coach house with an illegal 5th unit and turning it into a legal 3br 2ba 3 story coach house. On smaller deals this can be done by duplexing up an attic. Doing a value add that’s more than just pretty kitchens/baths and adding legal bedrooms/baths, livable sq ft, etc. Something quantitative on an appraisal report.

Thing that went wrong…..

Tenant from hell for the 1.22 million property wanted to break lease and she called the city walked inspectors through the 100 year old building (mechanical rooms, back stair case, etc.) and got multiple violations put on the building. This ended up costing over $10k between vacancy, attorneys, architects, etc. and also delayed the close of both properties as lender had cross collateralize mortgages. Took 5 months to close.
The 1.22 million property had lintels rusted out which are expensive and buyer wanted fixed. Always check the Lintels on brick buildings.
The 1.173 million property the bedrooms were kind of small. It worked out in the end but took dozens of showing to rent at top dollar. Lesson learned people spending $2000+ for a 2br 1ba want at least one bedroom to fit a queen with dressers on both sides. Ended up finding solution by reversing the way door opens so that they could fit a queen bed.

Happy flipping everyone!

3 Reply

Syed Lateef

Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes

7y

Appreciate the content you put out there @Henry Lazerow

Daniel Guerra

Investor · Greater Chicago Area and Northwest Indiana · Member since 2018 · 138 posts · 42 votes

7y

@Henry Lazerow You killed it! Great job!

I dream of doing a property like that one day.