New to Chicago. Please help with numbers in this deal.
Mentone, IN · Member since 2018 · 18 posts · 11 votes
Here is a list of questions that would help me in making an informed real estate decision.
Also, do you suggest any Facebook groups that have rules against selling and are more for advice/recommendations? Thank you!
I’ll try to answer some:
1. To get tax info I use: http://www.cookcountypropertyinfo.com/
2. This has many factors and an insurance broker can give you a better idea once you identify a property. Factors include flood zone, what the structure is made of (brick?), your deductible/ coverage, etc. If you want a recommendation, I know a knowledgeable broker who can go more into detail.
3. Would need to know more about the building and condition. Does it need tuckpointing? How old are the mechanicals? Some people like to break down capex needs and calculate the lifespan of each item to determine amount they should be putting in reserves monthly. Others use a percentage of rental income i.e. 5% for capex and 5% for repairs/maintenance.
4. Chicago is very diverse, I think you’ll find that a property manager might know the answer to your specific neighborhood. In hot areas such as west loop (rents ~1900+), tenants might move in back to back, whereas you might see a bit longer somewhere else. I assume 4% for my property in Logan Square (rents ~1500+). Also consider time of year and if you’re priced right.
5. I haven’t shopped around too much but the placement fee can be the first month of rent, then 7-10%. A lot of properties have a “managed by” sign out front, you could potentially call those numbers in your potential neighborhood to ask for their service fee. As for a 2 vs 4 unit, you can ask if there’s some sort of ‘bundle discount’, but I wouldn’t expect that for one building.
6. You can probably expect ~3%, mine was 2.4%. If you want to bring less cash to closing you could work a seller credit into your offer. E.g. 100k straight offer should be the same as a 110k offer with a 10k seller credit. You end up financing a bit more but have more cash to rehab.
I’m not a part of any fb groups, I think BP does a pretty good job of moderating posts to filter out unwanted sales pitches. I’ve been able to get a lot of help by messaging others here and going to meet ups to talk RE.
hope some of this helps!
I’ll try to answer some:
1. To get tax info I use: http://www.cookcountypropertyinfo.com/
2. This has many factors and an insurance broker can give you a better idea once you identify a property. Factors include flood zone, what the structure is made of (brick?), your deductible/ coverage, etc. If you want a recommendation, I know a knowledgeable broker who can go more into detail.
3. Would need to know more about the building and condition. Does it need tuckpointing? How old are the mechanicals? Some people like to break down capex needs and calculate the lifespan of each item to determine amount they should be putting in reserves monthly. Others use a percentage of rental income i.e. 5% for capex and 5% for repairs/maintenance.
4. Chicago is very diverse, I think you’ll find that a property manager might know the answer to your specific neighborhood. In hot areas such as west loop (rents ~1900+), tenants might move in back to back, whereas you might see a bit longer somewhere else. I assume 4% for my property in Logan Square (rents ~1500+). Also consider time of year and if you’re priced right.
5. I haven’t shopped around too much but the placement fee can be the first month of rent, then 7-10%. A lot of properties have a “managed by” sign out front, you could potentially call those numbers in your potential neighborhood to ask for their service fee. As for a 2 vs 4 unit, you can ask if there’s some sort of ‘bundle discount’, but I wouldn’t expect that for one building.
6. You can probably expect ~3%, mine was 2.4%. If you want to bring less cash to closing you could work a seller credit into your offer. E.g. 100k straight offer should be the same as a 110k offer with a 10k seller credit. You end up financing a bit more but have more cash to rehab.
I’m not a part of any fb groups, I think BP does a pretty good job of moderating posts to filter out unwanted sales pitches. I’ve been able to get a lot of help by messaging others here and going to meet ups to talk RE.
hope some of this helps!
@Brian N. Thanks this helps!
One thing I forgot to ask in my original post. What do you use to get a feel for crime in an area? I've always used Trulia in combination with a local government crime data website. Is Trulia pretty accurate for Chicago as it is in Indy?
@Fred Ewert - a few quick notes to piggyback onto @Brian N.'s great in-depth response:
1. Chicago recently reassessed values and raised property taxes, with some areas seeing a 20% increase for 2019. http://www.cookcountypropertyinfo.com/ is a great site that will have historical data, but you should add a buffer as odds are the 2019 taxes could be noticeably more.
4. At your specified price point, I would assume a 10% vacancy rate to be safe as you will most likely be in C neighborhoods and not be purchasing anything in the high-demand areas.
For crime I would use Trulia as a guide but highly suggest you spend some time here and connect with local real estate agents who know your target market. All cities are diverse and have their "spots", but Chicago is extremely diverse and neighborhoods change block-by-block.
Hope that helps and reach out with any other questions!
3. Your math is correct yes. It's an assumption though, similar to the 1% rule or the 50% rule (expenses) which both have circumstances where it's not accurate. Take extremes - you have the same exact property in two vastly different neighborhoods of Chicago. The capex + repairs and maintenance should be similar but the gross rent might change your reserve based off percentages. I would go with the your Indy resource on the $900 per door but I would ask how to come to that number and make your decision there based off your risk tolerance.
For crime, Trulia and city-data is a good start. If possible I'd recommend driving around at different times of the day throughout the week. Your agent should be knowledgeable of the area as well. Prior to buying in Logan Square, I was looking everywhere else (West Loop, South Loop, McKinley Park, Bridgeport, Pilsen, Little Village). My agent showed me some key places to look at properties and I've been very happy with where I bought. I'd recommend getting the opinion of an agent transacting in the area. (Just read @Tom Shallcross's response after typing this - fully agree)
When you're ready to take the next steps, I'd recommend talking to an agent and a lender. They are valuable resources/ consultants that don't charge you upfront fees.
Totally agree about touring the place in person with a local expert realtor. I did this in Indy and got a feel for the neighborhoods first hand.
The $900 maint./capex number was given to me by a PM and overall RE guru in Indy and is based on his actual data, an average of what they see at his company. However, the Chicago homes I'm seeing are a different build style despite being in the same generation. It would be interesting to find Chicago's version of this guy and see what numbers they see on average because I think general percents based on purchase price is a mistake probably. I believe its about how much square footage, year built, and how many doors (how much plumbing, hvac, electrical etc).