As the title states, I am looking into my first deal. It is a Duplex in New Chicago Indiana, Basically north Hobart. Here is the address, 3612 Michigan St, New Chicago, IN 46342. I am nervous, exited, and looking for help as I think I have a decent amount of knowledge but I know I will be missing things to ask the owner and what to look for. Here are some rough details the broker told me about the property/what I found out. It was built in the 30's and looks to have had the second story put on as an addition. It has 2 furnaces (one for upstairs and one for downstairs) but no AC's, they have wall units (renter acquires them). Each unit is about 900 square feet with the top unit having a balcony (more room?). The owner pays about 90$ a month on water/sewage/trash and the renter pays NIPSCO (gas and electric) and they do not have separate meters but I would like to put them in, if possible. From my understanding he has a decent turnover rate and places stay vacant for at least a month or two. He bought the property 10 years ago. It seems he is not managing it as efficient as he could be and the broker told me he was forced to by his now deceased father. He is in his mid 50's and has a 4 and 6 unit in Merriville IN on the same lot and another 4 unit close by, he just sold a single family in lake station IN as well. He is looking to unload one property a year until he is down to none. He works full time making good money and I understand he is not in it to win it. He is asking 69,900 and turned down an offer last year for 60,000. It is worth mentioning I originally came about this from a for rent ad on craigslist, so it is not for sale on any site(s) as I emailed him asking if he would like to sell. I live about an hour away in the south suburbs of chicago, is there anything I need to also know from managing a property "far" away. This is all i know, I am asking what more I should know and ask? I would be highly interested in picking someone's brain in person if you live around Orland Park IL or anywhere along I80 (joliet, minooka ext) as that is where I frequent. I am sorry for the long post but please read, look at google street view and use your vast knowledge to help an up and coming investor start on the path of success. I appreciate any and all help, thank you and have a wonderful day :)
Hi Richard. Thanks for sharing your first prospective deal. I am actually pretty familiar with the NWI area (used to live in Hobart and Chesterton).
In any case, from what I gather on Zillow (it’s listed for sale there by the way) it is currently getting $1,200 in gross monthly rent. If you get a 30 year mortgage with 20% down (Centier actually has a loan product that will allow those terms, and probably around 3.75% interest, even if you’re not going to live there), and you do a quick 50% rule calculation, you’ll be cash flowing about $172/door.
What kind of cash flow are you hoping to achieve?
@Richard Moro I invest entirely out of state. I have one hard fast rule. I never invest or offer on a property until I have vetted and found a PM. If you wait until after you own the thing you will have enormous pressure to take whomever you can find. I avoid this situation like the plague. It's far better to line out the PM first and just call when you close and tell them it's ready. Everything works smoother this way. Also remember you are talking about a 80+ year old property. Your cash flow will be hugely affected by maintenance and cap ex expense as well as prolonged vacancy's both as you suggested in your post and as a result of repairs due to deferred maintenance, if there is any. Judging from your post about the current owner there will be deferred maintenance. I would be sure I had a plan to deal with this. Just my thoughts. RR
70k sounds pretty steep. Are the units rent ready? Is the addition structurally sound? You're gonna want to walk through the house preferably with a contractor/home inspector to see how much work it requires to be rent ready.
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