First Deal, Good or Bad?

Real Estate Deal Analysis & Advice
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First Deal, Good or Bad?

Giovanni Garcia
Investor · Chicago, IL · Member since 2013 · 22 posts · 0 votes

Hey Biggerpockets!

I am looking to buy my first investment property; it’s a 3 unit building. I’ve made some steps as to show what my cash flow and other aspects of the property entails using my Cash Flow Analyzer.

Here is the listing from the MLS

http://www.realtor.com/realestateandhomes-detail/3144-W-Jackson-Blvd_Chicago_IL_60612_M83228-42313?source=web

file:///Users/giovannigarcia2013/Desktop/IMAG0117.jpg

file:///Users/giovannigarcia2013/Desktop/sheet%201.htm

After I did some running of the numbers, I believe this property as great potential to be a good investment. This property is an a C neighborhood and being rented already cash flowing at about $1900 a month. The cash on cash return is at a 60% which what really grab my attention. Also, the building as some upsides because the first floor unit can become a duplex of course with some repairs and the laundry is coin operator. On the outside of the building it as billboards for advertisement and the option to buy the empty lot next door anywhere from $1,000 up to $5,000. I believe this is a good buy but this is why I am here on biggerpockets to see the inputs of others.

Thanks for you time!

Giovanni Garcia

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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
13y

There you go those numbers look much more realistic to me. I'd say it's a pretty decent deal from the looks of what you posted.

One thing to ask about is the coin-op laundry. If it is the owner's then it's not as difficult but you will need to fix them every now and again, if it is a lease contract ask for a copy of the lease and yes the lease will likely stay with the building. Sometimes owners will sign the contract with a big payment up front and then all that they get the rest of the time is like $5/ mo and you're still paying for the water but don't get any money out of the deal...speaking of which you didn't account for water for the coin op laundry.

As for making the bottom a duplex that would be pretty nice, but don't use that to evaluate anything too much. I've seen agents, sellers, and ever Joe schmo in the world mention the better use like "you can build a home in the rear", or "you can add a unit" or whatever it is that makes the deal have this silver lining for the future. It is very often that it isn't possible it is either 100X more expensive because of one single item like say connecting to the sewer, or that zoning limits have already been met for the number of units or square footage. So buy it for what it does today and if you can do your conversion later then it's all gravy.

Good luck looks like it should be good for your first deal.

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  • Giovanni Garcia
    OP
    Investor · Chicago, IL · Member since 2013 · 22 posts · 0 votes
    13y

    Mehran Kamari Regarding the link I posted, I've now made it public. Hopefully it work! But I do not need to remodel any of the 3 units because they were already updated 2 years ago. Every unit also has stainless steel with wood flooring. I did actually confirm the rental prices and they are at moderate level. Similar units go for about $1250/1300. Only one of the units is on a lease and the other two are month by month. I would definitely need a good home inspector as you mentioned.

    Thanks Mehran for the input!

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  • Giovanni Garcia
    OP
    Investor · Chicago, IL · Member since 2013 · 22 posts · 0 votes
    13y

    Matt Devincenzo Thanks for going into detail about the coin-operated laundry, a valid point that needs to be addressed as far expenses. Thanks for the great perspective that you mentioned about buying the property for its current cash flow, rather than its fantasy potential. Very helpful!

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  • Giovanni Garcia
    OP
    Investor · Chicago, IL · Member since 2013 · 22 posts · 0 votes
    13y

    I'd like to add in a sub-topic. I am having a hard time getting a loan out due to lack of financial income Verification. Does anyone have any input on a hard lender? Or other ideas on how to make the deal possible in the Chicago area?

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  • Jonathan Pliszka
    Financial Advisor · Lexington, KY · Member since 2012 · 150 posts · 66 votes
    13y

    I'm actually pretty bullish on East Garfield Park myself. Giovanni Garcia, where are you estimating your rents from? Is this what the CHA is paying for 3-bedroom units? I'm assuming you'll be going Section 8 with this?

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  • Giovanni Garcia
    OP
    Investor · Chicago, IL · Member since 2013 · 22 posts · 0 votes
    13y

    Great to hear Jonathan that you're investing in this location to. But even better to know you are on BP! Jonathan Pliszka, I received my estimates from the rent-rolls which I required from the realtor when we did a walk through of the apartment. I also used Rentometer. Lastly, I happen to know a couple friends who live in the area to, which was all useful information. Honestly I'm not to sure what CHA is paying for 3 bedrooms apartments. In this building 2 units out of the 3 are 4-bedroom units! I will not be going the section 8 route with this investment but will be doing my due diligence on some great tenants. Also, any recommendations are beneficial here, I'm all ears!

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