Be careful in Englewood. Yes it is seeing much improvement but it can still be a tough area to operate in especially for a new investor. Are you in the area and familiar with the area ? It will help a lot if you have local knowledge.
How many units in the building for $140K ? and what condition is it in ?
Have you run comps to see if the price is right ? Are your rental numbers realistic ?
I am an RE agent and I work parts of Englewood. I also own a building in that area. Feel free to PM me if you want me to look at the numbers or run some comps for you. A lot of people have bought properties in that area thinking the deal looked great and it turned out not to be so. Do as much due diligence as you can.
Best of luck.
Sorry, I didn't realize it posted five times. Please report the others than this one if you see it.
It's in Englewood of Chicago but in an area near the gentrifying parts where they built a plaza with Whole Foods, Starbucks, Chipotle, etc. There'a a community college and a CTA station nearby as well!
Does that help more?
Be careful in Englewood. Yes it is seeing much improvement but it can still be a tough area to operate in especially for a new investor. Are you in the area and familiar with the area ? It will help a lot if you have local knowledge.
How many units in the building for $140K ? and what condition is it in ?
Have you run comps to see if the price is right ? Are your rental numbers realistic ?
I am an RE agent and I work parts of Englewood. I also own a building in that area. Feel free to PM me if you want me to look at the numbers or run some comps for you. A lot of people have bought properties in that area thinking the deal looked great and it turned out not to be so. Do as much due diligence as you can.
Best of luck.
When it comes to property, I can guarantee you that you need to learn how not to fall in love with your potential deals. Every deal is going to look like the one that might change everything for you. Every time. It's always a myth, to some extent. One deal will not make or break anything, a first deal least of all.
I do not know the area, I have no clue what the place is actually worth, but I can read the warning signs in what you're writing. Back off and make a rational, bloodless decision.
@Henry T., "apparently that I shouldn’t let the opportunity pass me"?
Who's telling you that story? Your local fly-by-night wholesaler? Just askin'....
Thank you everyone who has replied and willing to give their opinion! I am skeptical of it too and yes I would be living in the property because it is FHA.
My agent has convinced me to get property. Even though it is my decision, logically I believe the numbers make sense when I see it.
Honestly, I just don’t want to make the wrong decision! It’s why I want honest opinions about all of it!
@Ronan M. I can PM you the numbers and send you the location for closer look!
@Henry T., how many of those "$2800 a month" won't you be getting because you live there? [eg. Not much good saying "but I'll move/rent it out as soon as I'm allowed", because you'll always get zero dollars as income from your next (proportional) primary, and so on].
I'm not objecting to your research / maybe buying it, but please don't let your Realtor skew the numbers about your primary-to-be in purely pro forma investment terms. Good luck...
@Brent Coombs I believe in being educated, given the tools and fully informed about all factors about decisions. However, I'm confused and not understanding your answer or what you exactly mean by mentioning about your primary-to-be in a pro forma investment terms?
Are you saying I shared too much information?
@Brent Coombs I believe in being educated, given the tools and fully informed about all factors about decisions. However, I'm confused and not understanding your answer or what you exactly mean by mentioning about your primary-to-be in a pro forma investment terms?
Are you saying I shared too much information?
No, I mean: why mention $2800/m if that's not what you'd be getting, living there? Cheers...
@Brent Coombs Thank you! It's the exact thought I had in my mind. Some examples of the numbers look like so.
The income would be $2800 a month. The residual amount after mortgage, water, taxes, electric and etc would be left over as $1500 a month. I would still be working a part-time job while in school and being a landlord which is some partial income not calculated with it all.
Her projected plan that she recommended was to use the residual amount after 8-12 months to invest in another property, pay off the property in less than 10 years and continue building an investment portfolio of properties and so forth.
As a student and young minded, I'm thinking why would I want all this debt over my head and would it be worth in the long run when I am 30. Is it the wisest decision or should I decline the offer presented?
As a student and young minded, I'm thinking why would I want all this debt over my head and would it be worth in the long run when I am 30. Is it the wisest decision or should I decline the offer presented?
I'm not trying to change your mind about earning a higher education but if I had the choice of having real estate debt vs. college loan/debt I'd choose the property debt any day. That is of course assuming that you are like most Americans and taking out a loan to fund their higher education.
As to your question though, I feel like there is more information that you would need to share. I'm really curious if you will need to bring the potential property up to code. Have you also calculated holding costs if your property will need to be updated and how long that will take? Will you still be able to afford the PITI payments during those months until it is rented? In other words, have you or an accountant done a cash-flow analysis statement on your assets to determine how long it will take until you will be in financial danger by taking on this property?
I also checked and it seems that the State that you want to invest in is also classified as a "Tenant Friendly" region, meaning that your renters are protected by the government in being late on their payments and you will need to wait longer in order to evict them from your property. I would reach out to a property manager on Google that works that area and interview them about your rights as a property owner vs. the rights your renters will have. I would also search for other property owners using your county assessor database and see if they would have a chance to meet up and talk about their experiences. I would be curious as to their experiences in the past two years with new tenants in your potential market.
Keep us updated about your decision going forward.
So the utilities aren't submetered, not even electricity? That can be crazy especially during the winter if you are running electric heat.
If those are your only 4 line items (insurance, tax, water, electricity) on your pro forma then I would take a step back and reevaluate. Things that I would consider.
Vacancy for the area... why are there 2 vacant units? If the current landlord says he will fill the two spots before the purchase then why hasn't he done it already?
Gas - A lot of chicago has gas heating / boilers... is it sub metered?
Deferred maintenance - If it is selling for less than the 2004 price, has had a period of vacancy in at least two of the units, then I would assume it's a motivated seller because he doesn't want to be in the RE business. In which case, he likely has not taken it upon himself to maintain the property. Have you seen the inside? Does it need a lot of work?
Property management - Someone else mentioned that Englewood is a hard area to operate in for a newbie.. and Chicago in general is not landlord friendly with a lot of small nuances and laws that you need to navigte. Ideally you would have a property management company coaching you through your first property for a year or so.
General maintenance - high maintenance tenants generally imply higher maintenance and turnover costs.
@Matt Ellis , yeah I always wonder that too. In L.A you practically never see small multis 2-4 units for sale with vacant units, of course they don't cash flow either which is a bit of an issue..
I heard the BP episode featuring a Chicago lawyer and investor. This is the one
https://www.biggerpockets.com/renewsblog/biggerpoc...
He was talking about a lot of the laws specific to Chicago so I'd definitely recommend listening to that one and maybe consulting with him or another attorney if investing in Chicago. Some landlords have lost a ton of money by not doing the leases the right way etc. There was also an issue with security deposits and I believe he said it's better not to accept them because of the way the laws are. It makes it harder to evict.
So the utilities aren't submetered, not even electricity? That can be crazy especially during the winter if you are running electric heat.
If those are your only 4 line items (insurance, tax, water, electricity) on your pro forma then I would take a step back and reevaluate. Things that I would consider.
Vacancy for the area... why are there 2 vacant units? If the current landlord says he will fill the two spots before the purchase then why hasn't he done it already?
Gas - A lot of chicago has gas heating / boilers... is it sub metered?
Deferred maintenance - If it is selling for less than the 2004 price, has had a period of vacancy in at least two of the units, then I would assume it's a motivated seller because he doesn't want to be in the RE business. In which case, he likely has not taken it upon himself to maintain the property. Have you seen the inside? Does it need a lot of work?
Property management - Someone else mentioned that Englewood is a hard area to operate in for a newbie.. and Chicago in general is not landlord friendly with a lot of small nuances and laws that you need to navigte. Ideally you would have a property management company coaching you through your first property for a year or so.
General maintenance - high maintenance tenants generally imply higher maintenance and turnover costs.
When you say sub-metered are you asking if each unit has individual heaters and furnaces? In that case, they do. All tenants pay their own own gas, electric and heat.
The property manager mentioned they left the newer one open for owner occupancy which is in pristine condition. The second vacant one was recently evicted about a month ago which they are renovating before closing as well.
I have seen the inside of the property, the two occupied units have been there for at least two years and it’s a little dirty which could use cleaning and refurnishing when they choose to move out. But why kick them out if they are loyal tenants.
The basement is not useable because it’s not accessible to tenants and where the heaters and furnaces are located.
If it is wise to hire a property management company, I definitely will if it is the case.