My First Turnkey - Elite Invest, Chicago

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My First Turnkey - Elite Invest, Chicago

David Fitch
Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes

I got a lot of value from Michael L's ongoing post about his experience with Elite in Chicago, so I thought I'd replicate that for others. 

https://www.biggerpockets.com/forums/223/topics/16...

I live in Southern California now, but am from the midwest, spent many years living in downtown Chicago, and went to grad school at UChicago, which is right where these guys are operating, so I'm familiar with the area. 

I happened to be in Chicago for work last week, and gave them a heads up that I would be in town, that I wanted to meet up, check out their operation, etc. Long story short, I liked what I saw, and just signed an agreement for my first property with them. I close in Mid May, and I'll provide updates as they are warranted.

I went with a 3 unit / 4bd (12 total bds) building, gut rehabbed. $275k, 25% down, estimated monthly rent $3600, pending review by CHA (these are almost all Section 8 tenants). 

More to come!

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JR Hinds
Investor · Portland, OR · Member since 2014 · 146 posts · 101 votes
10y

I've purchased 2 properties through Elite. I liked the work they did on the rehab on the two properties I purchased, but in all four units, it took them  a month or more to place tenants. My expectation was that the tenants would be in the property when we closed. And one unit has been vacant for 4 months now. When I asked about it, I was told to call back in a month and check on the status. I was disappointed that they weren't proactively sending me emails letting me know of the status, and expected me to put in the effort to contact them about it. The PM I have for my other multifamily unit is much more proactive with their communication.

Also, the projections they gave were high. I expected as much out of someone trying to sell a property. The 3 units that are rented ended up short of the rent projections they showed me. But with everything else I've experienced, I wouldn't recommend Elite as a PM.

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  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    Hey @David Fitch

    Any other insight on the numbers for this property you bought to get a better idea on the cash on cash, ROI, and cap rate?

    The McKernan Group4.957 Reviews
    WebsiteView Page
    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    Peter -

    I don't have (or really track to) those metrics. I suppose I would focus on cap rate if I was buying a property where the purchase and resale price was directly tied to cap rate (e.g. valuation of an apartment complex). For SFH and small multis, I just do my own thing.

    Specifically:

    • 25% down = $68,750
    • $3600/mo = $43,200/yr
    • Annual P&I = $12,600/yr (assume 4.25%, 30y fixed)
    • OpEx  = $21,600/yr assume 50% per the general rule of thumb I see floating around these forums (mgmt fee, repairs & maintenance, vacancy, insurance, snow removal, etc). 
    • Net CF = $9,000
    • $9,000 / $68,750 ~ 13% 

    Honestly, I think the 50% OpEx is high on the repair component for the first few years because it's a gut rehab, but it's a high crime / high risk area that may get trashed more than average too, so I'll assume 50% for my calculations. 

    0Reply
  • JR Hinds
    Investor · Portland, OR · Member since 2014 · 146 posts · 101 votes
    10y

    I've purchased 2 properties through Elite. I liked the work they did on the rehab on the two properties I purchased, but in all four units, it took them  a month or more to place tenants. My expectation was that the tenants would be in the property when we closed. And one unit has been vacant for 4 months now. When I asked about it, I was told to call back in a month and check on the status. I was disappointed that they weren't proactively sending me emails letting me know of the status, and expected me to put in the effort to contact them about it. The PM I have for my other multifamily unit is much more proactive with their communication.

    Also, the projections they gave were high. I expected as much out of someone trying to sell a property. The 3 units that are rented ended up short of the rent projections they showed me. But with everything else I've experienced, I wouldn't recommend Elite as a PM.

    4Reply
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    10y
    JR Hinds do they guarantee rent for the first year?
    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    @JR Hinds

    Can you share what was projected vs. what you ultimately got? And what month / year you first purchased? PM is fine if you think that's not appropriate for the thread.

    Thanks

    0Reply
  • JR Hinds
    Investor · Portland, OR · Member since 2014 · 146 posts · 101 votes
    10y

    @Percy N., there was no rent guarantee, but I was okay with that. I was, however, expecting that they would have tenants in the property when the deal closed.

    @David Fitch, I'm out of the country right now, but I'll post them when I'm back and have access to the rent projections and actual numbers. I closed on the first one in July, 2015 and the second one in November.

    1Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    @JR Hinds

    JR - just following up, assume you're back - do you mind sharing?


    Thanks!

    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    Been a while since I posted, and we're close to closing so figured I'd provide an update. 

    So far, things remain smooth. Was originally targeting a May 5th close, but had some delays with the city that bumped out the inspection, which then bumped out the close. Looking like another 2 weeks. 

    Otherwise, all is well - the financing side is pretty much ready, appraisal ordered (not complete), etc. Just waiting on an inspection, and then a close date. 

    More to come!

    0Reply
  • Petra M.
    Investor · Los Angeles, CA · Member since 2015 · 73 posts · 49 votes
    10y

    @David Fitch Thanks so much for doing this.  I really liked Michael L's post.

    What lender did you use and what % did you end up getting?  Were they OK with the delays in closing?

    0Reply
  • Harry Zhou
    Investor · Walnut Creek, CA · Member since 2015 · 101 posts · 32 votes
    10y

    hmm..., this one is not yet closed.

    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    @Petra M.

    I went with their recommended lender to make it easier (BlueStar mortgage), apparently they do about 90% of the financing for Elite. All options that I requested were 30y fixed - rates provided were 4.250%, 4.375%, 4.625%, with varying charges / credits associated with those. Also assumes 25% down.

    Still not closed - original target of May 5th is now a couple weeks in the rear view mirror. I'm following up 1-2 times per week with the construction coordinator to see when I can get my inspector in, but thus far I haven't gotten much traction. I'll give it another week or two before I escalate. I'm not day trading here, so don't really mind delays of a few weeks, but if it starts stretching to months, I'll be annoyed.

    2Reply
  • Jumpei Matsuda
    Tokyo, Tōkyō-to · Member since 2016 · 12 posts · 6 votes
    10y

    @David Fitch - thanks for posting this, as I am also looking at potentially working with them as well. 

    Hope you've been able to close and get the units tenanted?

    0Reply
  • Mike G.
    Colorado Springs, CO · Member since 2016 · 14 posts · 0 votes
    10y

    Hey David,

    Any updates on post-closing experience and getting tenants in place?

    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    Hi all - sorry for the delayed response.

    Closing is not complete, but it is finally scheduled for next Thursday. That makes it about 2 months past the originally anticipated close, which I'm fine with. I've had a lot of productive back and forth with Alex and his team, and the financing team at BlueStar. I'm told 2 of the 3 units already have screened and approved tenants available, so we're close.

    I had an independent inspection, and Elite agreed to all of the proposed repairs - most were pretty minor and easily accomplished. 

    Overall I've been happy with the team, and am already planning to purchase another building from them.

    I'll start posting progress / issues once tenants are in place.

    1Reply
  • Jumpei Matsuda
    Tokyo, Tōkyō-to · Member since 2016 · 12 posts · 6 votes
    10y

    Thanks for the update, @David Fitch. Best of luck, and keep us posted!

    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    I closed today on schedule. A nice gent came to my house on time this morning with all of the docs ready for signature. I initiated the wire transfer shortly thereafter. 

    Now, hopefully I'll get tenants in sooner rather than later! I have 4bd units so will be interesting to see if those are in higher or lower demand than the 3bd units (e.g. will I be waiting a while for tenants, or will they be filled almost immediately). 

    I'll provide additional updates as I have them.

    0Reply
  • Harry Zhou
    Investor · Walnut Creek, CA · Member since 2015 · 101 posts · 32 votes
    10y
    Originally posted by @David Fitch:

    I closed today on schedule. A nice gent came to my house on time this morning with all of the docs ready for signature. I initiated the wire transfer shortly thereafter. 

    Now, hopefully I'll get tenants in sooner rather than later! I have 4bd units so will be interesting to see if those are in higher or lower demand than the 3bd units (e.g. will I be waiting a while for tenants, or will they be filled almost immediately). 

    I'll provide additional updates as I have them.

     Finally! Congrats. It was about 6 mo ago when we discussed about this area/property?

    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    Hi there - yes probably about 5 months since initial discussion. 3 months of that was known delay, e.g. at the time that I selected the building it was still under construction and not expected to close until May. The actual delay between expected closing and actual closing was about 2 months, so not a big problem for me. 

    On the upside, I received confirmation that all requested repairs were completed that came out of my independent inspection. I really like their process for that - they set up a shared Google drive, post instructions for you to specify what you'd like fixed into a spreadsheet they have up there, and basically just upload the inspection report as supplementary info. They go line by line and make comments about what they'll fix, vs. what they won't. I had about 30 items to repair / complete (some weren't really repairs, but were items that just weren't complete at the time of inspection). They go through and take photos of the repairs and post those to the Google drive as well. 

    Now I just need some tenants! I received access to my Appfolio account, so I can see my building account, the applicants, status of all of that, etc. 

    More to come. 

    2Reply
  • Chris T.
    Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
    10y

    @David Fitch

    congratulations on your first turnkey!

    Just curious, have you dealt with section 8 tenants in the past? 

    Is Jillian Lundgren still at Elite? if so, please send her my regards if you talk to her. She is great. 

    0Reply
  • David Fitch
    OP
    Investor · Westlake Village, CA · Member since 2015 · 73 posts · 70 votes
    10y

    I have not dealt with Section 8 tenants, but am willing to give it a go. I'm not terrible picky about late payments as long as it eventually trickles in. It's long-term vacancy and / or large scale damage that concerns me the most. 

    I've really only worked with Alex, Sunny, and a few of the folks that coordinate the construction and prop mgmt onboarding, so I don't know if Jillian is still there.

    0Reply
  • David Gregory
    Charlotte, NC · Member since 2014 · 12 posts · 3 votes
    10y

    I can confirm that Jillian is still there. I email her occasionally as she works in the owner services dept. 

    0Reply
  • Nancy E.
    Rental Property Investor · Charlotte, NC · Member since 2015 · 128 posts · 29 votes
    10y

    Hello @David Fitch,

    Thanks for the update - I am planning to follow this story to the end. My business partner and I were interested in securing multi-family units, but most turn-key companies only focus on single family. With respect to Section 8 tenants, there are positives such as government guarantee rent each month and liability on property damage. You might want to research what the guidelines are in Chicago, so you are familiar with the rules. From my experience the only true negative with Section 8 is 12-month leases. The government requires annual renewal, so 24 or more months are not the norm.

    Good luck and keep us updated.

    From Nancy

    0Reply
  • Kenneth Dai
    Investor · Fairhaven, MA · Member since 2016 · 100 posts · 88 votes
    10y

    Hi @David Fitch - Thank you for the continuing story... I enjoy reading your on-going experience, and it helps to hear about other turnkey property purchasers who are on the same ride as I am.

    0Reply
  • Kenneth HynesPro Member
    Rental Property Investor · Easton, PA · Member since 2013 · 357 posts · 92 votes
    10y

    @David Fitch   Thanks for the blog and updates.  I just finished catching up on Michael L  thread, and offers honest on the ground feedback  about TK properties . 

    Question for you since it has been 2 months since you closed?  Tenants ?  fully occupied ?  any issues getting tenants into 4BD?  demand higher or lower than 3 BDs 

    I am considering TK and Chicago has made short list of cities to invest in 

    0Reply
  • Michael L.
    Investor · East Bay, CA · Member since 2014 · 156 posts · 48 votes
    10y
    Originally posted by @Kenneth Hynes:

    @David Fitch   Thanks for the blog and updates.  I just finished catching up on Michael L  thread, and offers honest on the ground feedback  about TK properties . 

    Question for you since it has been 2 months since you closed?  Tenants ?  fully occupied ?  any issues getting tenants into 4BD?  demand higher or lower than 3 BDs 

    I am considering TK and Chicago has made short list of cities to invest in 

     Thanks for the mention! :)

    1Reply
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